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Economy
Global growth in 2025 to match 2024 level; Outlook marred by political uncertainty
Munich Re’s economic outlook for 2025
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    In 2025, the global economy is expected to grow at roughly the same pace as in 2024. Ongoing solid development in the US and above-average growth rates in many emerging markets are likely to bolster growth. In the eurozone, growth will remain weak overall. China is expected to see a further drop in growth rates in 2025. While inflation in the world’s industrialised economies looks set to remain on a downward trajectory, not all central bank targets will be met. The outlook is overshadowed by unusually high levels of (geo)political uncertainty.

    Key factors influencing economic trends this year include stubbornly high geopolitical risks and uncertainty regarding future economic policy developments. The political course that the US ultimately charts out, especially with regard to trade policy, will be particularly important. Major geopolitical risk scenarios also remain in the form of Russia’s war of aggression in Ukraine and – despite recent positive signals – the unresolved conflict in the Middle East, which could escalate again.

    "I expect to see sustained robust growth in the US and ongoing stagnation in Germany in 2025. As such, the rate of growth in the eurozone is also likely to remain low overall. But this obscures the fact that economic momentum in Europe varies considerably from country to country. The risks clouding the global outlook outweigh the opportunities, and (geo)political uncertainty remains very high. If the new US administration opts to impose much higher tariffs, this will trigger a slowdown in global trade and growth – ultimately also in the US."
    Chief Economist Michael Menhart

    The main conclusions reached in Munich Re’s economic outlook for 2025:

    • The global economy will remain characterized by substantial differences in growth rates among major economies – and also across economic sectors. The rate of global growth in 2024 – relatively moderate in a longer-term comparison – was driven by momentum in the services sector, whereas industrial manufacturing showed only weak development all in all. This explains why US economic growth remained very robust at just shy of 3%; whereas Germany, Europe’s largest economy, stagnated. Growth in China was hindered by the real estate crisis in particular. Inflation in industrialised countries dropped significantly year on year, although inflationary pressure remained due to above-average price increases in the services sector.
    • Global economic growth in 2025 looks set to roughly match the 2024 level. Growth in the US is expected to dip slightly and remain solid at roughly 2.5%, also thanks to higher productivity momentum than in Europe. Economic output in the eurozone is predicted to grow by 1% again, after very weak growth in the previous two years. These figures do, however, conceal clear differences within the euro area: countries whose economies are dominated by the services sector, such as Spain, will achieve much more dynamic growth. Germany, on the other hand, is likely to finish bottom of the table again, also due to pressure from high energy prices and an environment in which German companies are becoming less competitive on the international stage.
    • The rate of inflation in the eurozone is expected to continue to drop year on year and move closer into line with the 2% target set by the European Central Bank (ECB). The US, on the other hand, will continue to face more elevated price pressure and is unlikely to meet the Federal Reserve’s inflation target. With this in mind, financial markets and a majority of economic forecasters are predicting more rate cuts by the ECB than by the Federal Reserve in 2025. 
    • All in all, the uncertainty associated with the global economic outlook remains extremely high, with risks outweighing opportunities. The political course that the US ultimately charts out, especially with regard to trade policy, will be particularly important. A drastic increase in the tariffs imposed on major trading partners and retaliation by the countries affected could lead to a global trade conflict. This would translate into lower economic growth, also in the US, and would send inflation upward again. Major geopolitical risk scenarios also remain in the form of the conflict between China and Taiwan, Russia’s war of aggression in Ukraine and – despite recent positive signals – the unresolved conflict in the Middle East. If, by contrast, the tension in the Middle East eases or the war in Ukraine ends, this could trigger a marked improvement in sentiment in the corporate sector and among private households alike, particularly in Europe, which would fuel higher growth.
    Experts
    Michael Menhart
    Michael Menhart
    Head of Economics, Sustainability and Public Affairs
    Oliver Büsse
    Oliver Büsse
    Head of Economic Research

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