Global Economic Outlook 2025: Regional Highlights

Japan

  • Economy recovering slowly with ~0.5% annual growth potential.
  • Downside risks elevated due to higher US tariffs.
  • BOJ revised down GDP and CPI forecasts, delaying 2% inflation target.
  • Expect BOJ rate hike in January 2026, then steady rates amid possible wage slowdown.

Asia (Excluding Japan)

  • Export and capital expenditure growth likely to slow sharply in H2 2025 due to tariffs, policy uncertainty, and weak global demand.
  • Open economies (Thailand, Singapore, Taiwan, Korea) most vulnerable; India and the Philippines more insulated.
  • Disinflation to continue driven by lower oil prices, weak demand, and shifting Chinese exports.
  • Frontloaded and deeper rate cuts expected, alongside fiscal support.
  • Specifics:
    • Korea: Two 25bp rate cuts to 2.00% by end-2026.
    • India: 50bp further cuts expected; trade diversion is a positive.
    • Indonesia: Fiscal risks from populist policies; widening current account deficits.
    • Australia: Sub-trend growth; two 25bp rate cuts expected.
    • New Zealand: Inflation near target; one 25bp cut expected.

China

  • Early 2025 growth buoyed by export front-loading and trade programs.
  • H2 faces headwinds: payback of front-loading, high base effects, property market fallout.
  • Tariff truce and potential tariff revocations may delay stimulus and reforms.
  • Beijing likely to boost policy support later to hit 5% growth target.
  • Clearing property sector remains top priority.

United States

  • Legal uncertainty on tariffs due to court rulings.
  • Tariff-driven inflation expected to push core PCE inflation higher soon.
  • Fed to cut rates: 25bp in Dec 2025 and more in early 2026.
  • Congressional tax/spending bills expected by summer, likely modestly expansionary.
  • Labor market cooling gradually, with downside risks skewed.

Canada

  • Bank of Canada expected to cut rates by 25bp in July 2025.
  • Inflation at target but shelter inflation will moderate as policy eases.
  • Unemployment may stay elevated; tariff risks increase downside growth pressure.

Euro Area

  • Medium-term fiscal policy positive for growth; near-term challenged by tariffs.
  • Core inflation expected above target in 2025 with tariff-related upside risks.
  • ECB expected to cut rates to 1.50% by December 2025 to cushion tariff shocks.
  • ECB winding down asset purchase programs steadily.

United Kingdom

  • Growth lost momentum late 2024 after strong Q1.
  • Risks: higher yields, tariffs, weak confidence vs. low unemployment and wage growth.
  • Headline inflation rising due to base and energy effects, but underlying inflation easing.
  • Easing cycle underway with quarterly rate cuts expected until early 2026.