What lies ahead for the global economy in 2025? | Counting the Cost

[Music] [Music] hello I'm Adrien finigan and this is counting the cost on Al jazer your weekly look at the world of business and economics this week in 2024 the fight against the High Cost of Living was declared to be almost one but have S Cal Banks really managed to reign in inflation and will prices and bills drop significantly in 2025 much of that of course depends on the price of oil but despite geopolitical tensions in the Middle East prices remain subdued could that change in 2025 and what would it mean for energy markets and unlike

the rest of the world China faces deflation another threat to its economy at Donald Trump's threatened tariff hikes but it's not just Beijing at risk could the US president elect spark a global trade [Music] War a global fight against inflation geopolitical tensions in the Middle East an escalation in trade tariffs between China on the one side the US and its allies on the other a slowing Chinese economy that has raised alarm due to its ramifications for the rest of the world and a strong US dollar with a robust economy while Europe plays catchup the global

economy has faced multiple challenges in the past year yet it has proven to be for the most part resilient so what's in store for 2025 we'll discuss that with our guests shortly but first let's break down what actually happened economically in 2024 well the international monetary fund has declared that the global battle against inflation has largely been won in 2022 after surging to its highest level in decades inflation began to steadily Decline and is expected to fall to 3 and a half% by the end of 2025 that means for people like you and me prices

will rise more slowly making the cost of living more affordable but there are fears that inflation could be reignited if tension continues in the Middle East historically war in the region has always led to an increase in the price of oil although so far Israel's 14-month war on Gaza has done little to push up the cost now that could quickly change if Iran and Israel go to war experts also warned that president-elect Donald Trump's policies could fuel inflation and start multiple trade Wars Trump has already threatened tariffs on bricks Nations if they develop a new

common currency to challenge the US dollar he's also said that on his first day in office he will impose an additional 10% tariff on all Chinese Goods China's economy is still struggling with a slump in the real estate market a debt crisis and continued deflation for 2024 it's economic growth was expected to be around 4.8% just shy of beijing's 5% Target researchers say that the country is suffering from overproduction and underc consumption meanwhile Mario draki the former president of the European Central Bank has warned that the EU runs the risk of falling behind both China

and the United States in terms of competitiveness and GDP that comes as both France and Germany the eu's powerhouses both face an economic downturn and political crisis and despite various measures taken by EU member states stronger growth isn't expected in 2025 so let's review 2024 and look ahead to 2025 with our panel of experts we joined from London by belal haiz founder and CEO of macro hiive from Singapore we're joined by Deborah Elms head of trade policy at Hinrich that's an organization or the Hinrich Foundation which is an organization specializing in trade research and from

London Ian golden a professor of globalization and development at Oxford University Welcome to you all Bal it felt like a wild roller coaster at times but what sort of year was 2024 economically was it good bad or perfectly average well you're absolutely right it was a roller coaster year overall it depends who you ask but given that stocks were up overall given the fact that inflation was falling uh growth in general especially in the US was strong WR I would say that 2024 on balance was very very good um especially given some of the geopolitics

that we saw over the course of the year and is the war against inflation one 2024 will be remembered by many people around the world of course for the High Cost of Living we were all finding it a bit hard to to to meet uh you know our our bills are we likely to see further interest rate Cuts in 2025 are prices likely to to fall or at least not grow as quickly well personally I don't think the inflation dragon has been slain while inflation has fallen over the course of 2024 I think it will

remain sticky over the course of 2025 now many central banks will continue to cut rates and I do think that that's in some ways uh they're being behind the curve and thinking that they remain in the old Paradigm of low inflation so my bias is that inflation will be sticky or stickier in 2020 and that many central banks uh will end up not cutting as much as uh many people expect at the moment Deborah 2024 was a a troubling year in particular for China's economy but we've got the threat of of deflation there what's gone

wrong uh and and has the government done enough do you think to get China's economy back on track this second answer the second question is easier to answer which is no they haven't quite done enough partly because the scale of the problem has been quite significant I mean they have taken steps in 2024 to deal with a declining domestic Market particularly around property prices in which uh so many especially so many average citizens in China have invested in property and trying to sort that out has consumed a lot of time and effort internally within China

but I think if you look outside of China actually 2024 has been relatively good economic growth especially for the rest of the region given the extent of turmoil that we've had in other locations I mean inflation yes is is a problem but it's not quite as Central I think to many of the economies across Asia as it has been for others and so I think overall relatively decent amounts of economic growth especially given the turbulence elsewhere Ian what's your view on 2024 how much damage have the ongoing Wars in Gaza and Ukraine the the the

geopolitical risks the continuing tension done to our interl economies just just how bad was 2024 in your view I think 2024 has been surprisingly good not least in Asia where we've had average growth rates of over 5% even China people talk of a crisis 5% growth we've never achieved that in Europe or the US on a sustained basis so you know that sort of Crisis ain't too bad if you're in Europe or in the US clearly big overhangs I think globalization is under threat it's alive well in moving to Asia uh but certainly across the

Atlantic uh I think it's under threat and the wars in Gaza and Israel and um in Ukraine are certainly undermining it so we are seeing a real threat but I think the real challenge is going to come in 2025 when we discover whether uh president Trump does what he says he's going to do which is start a tariff war and that would be very serious I think the expulsion of undocumented workers in the US would also slow the US economy down dramatically so if the US uh does what president Trump says he's going to do

I think we're going to have a much more difficult 2025 and Ian what what would a a tariff War a trade War actually look and feel like for the rest of us well I think it would be very targeted um I think there'd be retaliation so I think we're really going backwards in terms of what's been achieved over the last 40 years in terms of lowering tariffs a relatively open trade system it would be particularly bad I think uh for European countries I think it would be bad for some Asian countries and lower income countries

uh like those in Africa I think will be particularly disadvantaged so it'll be near Shoring friend Shoring reshoring uh these things I think will make trade much more political and reinforce many of the negative tendencies that we've seen at times in the past so it it'll make it a very very difficult for global companies this will be particularly challenging because how do you organize your supply chains uh how do you ensure that your business thrives globally when parts of your business are being isolated through politics Bal do you agree with that Will trump do you

think impose terce will he start trade Wars uh as as soon as he comes into office well I think certainly uh some form of trade Wars and and some kind of imposition of tariffs he he will try to engage in the the the larger question is something he did talk about in his campaign Trail was introducing a universal tariff against all countries whether that's a 5% or 10% tariff and that's a change from what he did at the last time he was in office where it was more like bilateral uh trade Wars you know with

China or with Mexico and so on so if he was to introduce this Universal tariff against other all countries then that would be very very negative overall so that's for me the the big thing is he going to do that my base case is instead he will um use tariffs as a weapon against countries uh you know to try to get advantageous trade deals with different countries around the world which does introduce uncertainty as as Ian mentioned but the biggest risk would be if it were if we were to see Universal terrorists which would take

us back to what we saw in 1930 when we had the Smoot hly act which coincided with a Great Depression Deborah what would that mean for for China's economy in in particular as uh uh as precarious as as it currently is well I think if the if the tariffs were truly Universal actually the damage would be relatively modest unless you're in the United States at which point everything suddenly became significantly more expensive but if it was Universal and if it was even then basically everyone else is on the same playing field entering the US market

so I don't I don't think that that's the problem but I think the challenge is that it's unlikely to be a universal policy which means that there will be opportunities for adjustments depending on country or Market or product or even company itself and so that unevenness of application I think is very damaging and creates all kinds of challenges for the rest of the world who will have to navigate increasing complexity increasing difficulty in doing trade and once you've declared that this is an acceptable use of of tariffs or an acceptable use of trade policy then

you also give license to others to do something similar I.E we've basically taken the rulebook of the last 70 plus years thrown it out the window and said do whatever you would like it's the sort of law of the Jungle and I think that is extremely damaging to all of us especially for Asia which is very export dependent so if you're export driven and exports are becoming increasingly difficult compliance costs are through the roof that is really going to put some pressure on economic growth grow into 2025 Deborah we'll talk about about the EU in

in a in a few minutes which of course has got its its own problems but if Trump does what you you think he he he might do or what we all think he he might do he's threatened to do it why wouldn't he carry through with it if he starts uh some sort of tariff War would China be forced perhaps do you think to to to make friends at least economically speaking more with with Europe I think it's possible I mean I think one of the there are so many challenges we have with an incoming

Trump Administration but one of them that I think I see over and over again in the last few weeks is difficulties individuals have in imagining an alternative universe that we're about to enter and so you would have said if ID asked you a year ago or something you know are China and Europe going to become best friends you would have said of course not I'm not suggesting that's going to happen in 2025 but my point is that there are Now options on the table as we head into 2025 and beyond that I think would have

been challenging to imagine even just a very short time ago and and so I think certainly within Europe there is a rethink happening on their relationships with the United States relationships within Europe with each other also relationships with China and there is a lot of cross tensions between those especially European uh e economies that are tightly dependent on China CH those which are less dependent on China those which have to think very hard about what does the block do as a group what do they do as individual countries there are a lot of complexities that

are that are going to create a lot of challenges for officials certainly and also for companies heading into 2025 when the rules are changing so quickly Ian as deer said the result of it of a tariff War could be that that the only people feeling the pain the Real Pain could be American consumers you'll suddenly find that they're paying a lot more uh for goods how how damaging could president Trump's uh uh threatened tariff War be for the American economy I think it could be very damaging indeed um I think we likely to see inflation

go up therefore interest rates go up growth slow uh it'll aggravate many of the inequalities in the US um and I think it would be associated with very very severe disruptions and if it's compound by his threat to remove undocumented workers we'll see rapid increases in construction costs in food costs uh in Services costs like Elderly Care and other care compounding that uh further increasing interest rates uh so I think the as long as the FED remains independent uh it's going to be very very difficult in that environment to reduce interest rates and stimulate growth

in the US uh I also think that it's not Asia that's most vulnerable to tff because actually 70% of Asian trade is within Asia uh it's really certain countries like the UK which are trying to diversify increasingly into the US market um and other commodity exporters that will be particularly vulnerable uh to a tariff War so that is is a a big worry B why is Europe lagging behind both the US and China in terms of competitiveness what does it need to do to catch up can it catch up or that battle already lost well

um there's a lot going on in Europe I would say fundamentally uh if we just focus on Germany which is the supposed the largest economy within Europe and historically has been the sort of the leading the engine for for Europe and what we see with Germany is that fundamentally its whole business model or economic model has broken so historically its model was essentially to import cheap energy from Russia manufacture um uh diesel or petrol cars and then export that to the rest of the world and all parts of that business model has broken down no

longer do they have cheap energy um on top of that Germany no longer uh is the dominant power automaker in the world in the sense that the world's moved on to electric cars and Germany lags in that so there's a fundamental reshape needed in in the Germany German economy and so if Germany lags then that will pull Europe down overall um so the task is quite large for for Europe to do something um a key thing will be for for them to think about cheaper energy sources um another aspect of this is to shift the

industrial focus of of Europe especially Germany um away from uh um the traditional Auto sector another aspect of this is that they'll need to think more about being more fiscally active um in general and Link that to investment um overall and that's been a big challenge for for the Europeans as we've seen uh in in the latter part of 2024 where the German government and the French government have have fallen in in different for ways and been unable to uh Implement uh fiscal policies to to what they had planned to uh so they've got lots

of challenges um and I think that uh 2025 will be an important test for for Europe but B is the political will there to surmount these challenges it's a great question um I think that there is a a will to try to um improve the conditions of the economy overall the challenge you have in all of these countries is that you really need a european-wide policy to to make things really uh improve instead what you're seeing on the political side is each country is moving in in in inwards into itself so there's more of an

insular approach for each country where there's infighting within France within Germany and so that means that there's a lack of a European Vision and that's a big big big problem so so I think while there is a will for change in each country um the nature of that debate is such that it's preventing the the most viable way for them to improve which is a european-wide solution Deborah how how does Asia view Europe's sluggishness right right now what's the what's the view from there well I think one of the challenges that we have overall and

one of the reasons why I think Donald Trump's entry back into power in January is so dangerous is that we have a global system that is really not in great shape either we have very few political leaders in Asia or in Europe or anywhere frankly with the stature to push through potentially challenging domestic level reforms let alone coordinate some kind of international consistent response or at least even within a smaller group of countries I think it's very hard to see who is going to be able to push for some kind of stabilizing measures some kind

of coordinated response and I think that is a huge challenge um and it's not just about what Europe does or doesn't do it's not just about what different Asian markets do or don't do it's really a sort of global phenomenon and that's what makes I think this period we're entering so problematic I one final word on on Europe here what are what are what are the main challenges that you see for Europe going uh forward here and with with Donald Trump back in the White House to what extent will will all of us not just

Europe but the whole world have to work differently I think the first thing to say about Europe is that the economic model that Europeans have chosen uh is one which I think they're broadly comfortable with which is relatively short working weeks long holidays and very strong social safety nets care health education largely free in many countries that model of course is what is behind relatively slower growth Europeans have made a tradeoff uh that they want a way of life uh they want the nature of the environment a work life balance which is I think different

to that in many other countries and in of Asia and even in the US and that drives I think an underlying level of lower growth than you'd have in other places whether that's sustainable uh whether it'll have to change is the question of course it's a source of immense political tension within countries so I think it's likely to continue on that path I think Europeans are broadly comfortable with the way of life they've chosen and as a bigger share of the European economy is Services which cannot rarely be speeded up by AI like care like

Hospitality uh like Leisure um we move from a world of manufacturing essentially to massages meals uh and medical uh care then you have very low probability of AI being the driver of very much more rapid growth it tighter integration within Europe is absolutely key uh the Capital Market integration the sorts of things that Mario dragi has recommended uh are necessary and we are seeing that worked out but I don't think that Europe will have a manufacturing Revival of a major sort or a Revival in its growth rates to well over 2% I think we have

to get comfortable in Europe and it's a Contracting Workforce a Contracting population so PR capita income still increases if you only grow at 2% and I think that's the future for Europe okay um I'm going to ask you now to to to gaze into your your crystal balls and and give us your predictions for 2025 I know it's an impossible task and I'm not going to hold you to to anything that you say Bel we haven't even discussed Energy prices yet um you know give us your view of what we can expect generally in 2025

and also of course pivotal to to inflation our Energy prices what what's going to happen to those next year well I think on the energy price side I actually think Energy prices will be relatively stable over the course of 2025 or if anything I think there there's a risk they could end up going lower over the course of the year and that's mainly premised on the if we look at the amount of Supply that's coming on the market um over the course of 2025 is relatively High um I also think there will be sluggish growth

in some key economies whether it's China or in Europe so the demand will be less as well and I also think while we do have the geopolitical tensions uh my sense is that it won't necessarily escalate in a way that will disturb key oil producers Deborah what's your view of of 2025 particularly when it comes to Asian economies where will new sources of growth come from in 2025 or is this year set to be a pretty morban one for for Asian economy ah I'm losing audio um I think you were asking me about my 2025

prediction hopefully it's good on your end my audio um technology is always you know uneven as we can see from my audio today and so I do think that there are other challenges ahead besides those which we've talked about including technology issues climate remains on the agenda despite all of this difficulties we've seen unexpected physical battles conflict you know crossb conflict that is still a problem still have inequality I mean there's a number of things that are a challenge for 2025 and again it is going to be a very unusual very busy year but where

in 2025 are new sources of growth going to come from Deborah well that's a tough question isn't it I I would love to say from lots of green shoots it's going to be fantastic but uh it is hard to see where the pockets of opport opportunity will be this in 2025 I think because we're going to have such disruption and it's going to be happening so quickly I'm not seeing this time around at least with a trump two where those growth opportunities will be for sure because the it's like an earthquake is hit and now

we have all their earthquakes and other tsunamis and we have to try to figure out how that all comes together to deliver opportunities in some places and so identifying ahead of time where those will be is challenging more challenging than normal I know Ian wants to wants to come in on that one as well Ian what one sees depends very much on where one stands and um my sense that new growth is going to come from Asia growing at 5% on average a year is astoundingly good by historical um comparisons and many countries in Asia

will be growing at more than that so the answer is Asia uh the sectoral answer I think is in certain areas of Biotech particularly uh medical devices uh medicine fantastic advances there's terrific advances as well on Renewables and energy the price of of energy is coming down dramatically on Renewables and EVS um and I think we will see AI leading to very rapid advances in some other areas as well over the coming years so I think it's going to be a bright year despite this reverberations of uncertainty not in the US I think the uncertainties

that Trump will generate are going to make it a very difficult investment environment and I think Europe is also very uncertain but if I was sitting in Asia and I think to some extent we you sitting uh in the Gulf um and Middle East uh certainly the Emirates and Qatar part of the Middle East I think it's a pretty bright future in 2025 and I've got about a minute left on on the discussion I just want to we have discussed deglobalization at all do you do you see that Trend continuing throughout 2025 yes it's it's

not so much de globalization as a very rapid transformation of globalization much more Asian globalization so globalization alive and well in Asia uh I see uh transformation digital uh globalization is still going very fast investment Flows In some regions are holding up but we're certainly going to be see a restructuring of globalization uh and unfortunately what we seeing as well is a collapse of the globalization of cooperation so multilateralism uh the development of Cooperative solutions to the risks we face is collapsing very rapidly that means more risk more systemic risk expect not only slower attempt

slower containment of climate change but also pandemics uh uh conflict and other shocks if you don't have cooperation that risk Rises very rapidly so that's the most woring aspect of the transformation of globalization and there we must end it it's been fascinating wishing you all a Happy a healthy and prosperous 2025 thanks for being with us on counting the cost thank you thank you and that's our show for this week if you'd like to give us your predictions for 2025 or comment on the discussion you've just seen I'm at a finigan on X try to

remember to use the # a jctc or you could drop us a line counting the cost of z.net is our email address as always there's plenty more for you online at alo.com CC that takes you straight to our page there you'll find individual reports links even entire episodes for you to catch up on but that's it for this edition of counting the cost I'm Adrien finigan from the team here in Doha thanks for being with us the news on Al jazer is next