S&P Global Projects Global Economic Growth at 3% for 2025

New Delhi, Dec 5 (NationPress) S&P Global Ratings has predicted a global economic growth rate of 3 percent in 2025, with a slowdown observed in the US and China, while the Eurozone continues its recovery and emerging markets start to regain stability. S&P Global stated, “With easing inflation, resilient labour markets, and sturdy consumer spending bolstering economic activity in most developed markets, we anticipate consistent growth in the upcoming year.”

However, S&P Global Ratings noted that regional and country-specific discrepancies, along with the overarching geopolitical uncertainty, complicate the overall outlook, as detailed in their report titled 'Global Credit Outlook 2025: Promise And Peril'.

The report also indicates that soft landings in various major economies and ongoing reductions in policy interest rates are likely to enhance global credit conditions in 2025. Alexandre Birry, the Global Head of S&P Global Ratings Credit Research & Insights, commented, “Central banks have begun to lower their key interest rates, and we foresee additional monetary easing to follow, although at differing rates across regions.” He emphasized that the decline in rates will be slower than the previous increase, with rates expected to stabilize at levels higher than those experienced during the extended period of inexpensive loans after the global financial crisis.

S&P Global Ratings also anticipates a reduction in defaults, although at a slower rate compared to earlier increases. The lowest-rated borrowers continue to face challenges due to high borrowing costs, lasting effects of elevated prices on consumer purchasing power, and increased geopolitical risk, particularly from rising protectionism affecting global trade.

Gregg Lemos-Stein, Chief Analytical Officer for Corporate Ratings, remarked, “Deepening geopolitical divides represent the most significant threat to an improving credit landscape.” The ongoing Russia-Ukraine conflict, intensified tensions in the Middle East, and rising domestic polarization in various markets could disrupt trade and investment flows, destabilize financial markets, and compel governments to boost defense spending amid already constrained budgets, according to the report.

The anticipated return of US President-elect Donald Trump to the White House is expected to have global repercussions, shrouded in a high degree of uncertainty. On trade issues, Trump has proposed universal tariffs on all imports to the US and significantly higher taxes on Chinese goods. He has also threatened to impose 25 percent tariffs on goods from Canada and Mexico unless those nations curb immigration and drug trafficking into the US, as per the report.

S&P Global Ratings believes these developments could have inflationary effects in the short term, with companies facing increased input costs and consumers paying more for finished products, which could hinder US GDP growth in the medium term while maintaining high benchmark interest rates and accelerating the diversification of supply chains away from China in the long run. Additionally, Trump’s commitment to withdraw military funding for Ukraine may further pressure European governments in their support for the nation.

We expect the bilateral trade dynamics between the US and China to become even more strained. Furthermore, Europe has implemented trade-protection measures to counter state subsidies provided to strategic industries in China. Should global supply chains diversify away from China, it would have far-reaching effects, creating unknown winners and losers, increasing supply chain complexities, and potentially reigniting inflationary pressures in various markets.

All these factors could disrupt central banks' monetary policy strategies and impact capital flows. Specifically, any slowdown in the US Federal Reserve's rate-cutting cycle may limit the ability of emerging markets' central banks to pursue their monetary policies.

For US corporations, policies that lead to higher input costs are likely to squeeze profit margins. Industries relying on highly engineered products from China for specialized manufacturing could be heavily impacted, as relocating these facilities is costly and challenging to staff. This scenario is particularly relevant for products like semiconductors and electrical components that are essential for technology firms, as well as sectors focused on renewable energy.

Simultaneously, the rise in protectionism in Western economies could hinder the Asia-Pacific region, which is heavily reliant on exports. In China, the ongoing property crisis, coupled with increased tariffs, is likely to exacerbate the economic challenges, further complicating the outlook, the report concludes.