Global Economic Forecast for 2025 and Today's Pressing Global Issues

Unlock the future of global economics as we forecast the landscape of 2025, dissecting the intricate challenges and opportunities across Europe, the United States, Asia, and Australasia. Will Germany's production continue to slide, and how will France balance growth and fiscal reform? What impact will President Trump's policies have on the U.S. economy, and can India sustain its rapid growth fueled by domestic consumption and infrastructure investments? Explore the dynamics of China's trade tensions, Japan's innovation-driven stability, and Australasia's export strength. Join us as we analyze these regions and more, offering a panoramic view of the global economic stage.

But the world isn't just about economics – we also explore the critical issues of water regulation in the UK, questioning Ofwat's effectiveness amidst corporate violations. The episode sheds light on defense spending and escalating military tensions with Israel and the Houthis. Dive into the energy sector's soaring profits amid a crisis, alongside retail struggles due to low Christmas sales. We also assess Europe's response to possible Russian-linked infrastructure attacks in the Baltic Sea and the geopolitical ripples of Donald Trump's energy demands on the EU. Engage with us for an insightful journey through today's pressing global issues.

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Chapters

• 0:04 Global Economic Outlook for 2025
• 13:04 Challenges in UK Water Regulation

Transcript

Tony Hines: 0:04

Hello, you're listening to the Chain Reaction Podcast, all about supply chain advantage. I'm Tony Hines, and thanks for dropping along today. Great episode coming your way in just a few moments. Stick around, stay tuned, find out more. Well, in today's episode, we're going to take a look at the outlook for 2025. We're going to take a look at Europe, the United States and Southeast Asia and just take a look to see what prospects are in store for 2025. And we've also got a brief roundup of some of the news impacting global supply chains this week Chain reaction global supply chains this week Chain Reaction.

Tony Hines: 0:45

As we move into 2025, the global economic landscape is shaped by a mix of challenges and opportunities. Let's take a closer look at the outlook for leading economies in Europe, the United States, asia and Australasia. Let's take a look at Europe first. The German economy is expected to remain in a challenging position, with production declining in key sectors such as car manufacturing and mechanical engineering. But despite this, the German economy continues to be a significant player in global manufacturing. It contributes about 20% of its GDP.

Tony Hines: 1:20

In France, modest GDP growth of 0.8% in 2025 is forecast. Fiscal adjustments and political uncertainty are the key challenges, but monetary policy easing is expected to provide some support. As for Italy, italy's economy is forecast to grow by 1% in 2025, driven by increased consumption and spending, which is related to the recovery and resilience plan. Inflation is expected to rise to 1.9%, with the government deficit falling below 3% of GDP. In the UK, the economy is navigating sluggish growth, with GDP growth at just 0.1% in Q3 and 0% in 2024 Q4. In fact, I think the GDP growth for Q3 was adjusted to 0% in some later figures. However, business investment is on the rise and inflation is expected to moderate to around 2% by the end of 2025. But nothing certain because the Labour government's budget at the end of 2025, but nothing certain because the Labour government's budget at the end of 2024 created an employment tax through higher national insurance, which nobody was very happy with, and retailers, manufacturers and even the Bank of England have complained about the impact of this. It's hindered growth rather than accelerated growth, and it's likely to drive inflation.

Tony Hines: 2:49

In the United States, it could be a year of two halves. Initial resilience is expected, driven by post-election optimism when President Trump comes to power in January, but the overall combination of proposed policy measures, such as the tariffs on China, canada, mexico and elsewhere, could boost prices and dampen economic growth. Inflationary pressure and tighter policy from the Fed Reserve are likely to shape the economic landscape In Asia. China's economy is projected to grow by 4.1% in 2025, supported by stimulus measures. However, us tariffs on Chinese exports are expected to impact growth, highlighting the ongoing trade tensions with the United States.

Tony Hines: 3:36

Japan's economic outlook remains stable, with moderate growth expected. The country continues to focus on technological innovation and export-driven growth. Despite demographic challenges, australia and their economy is expected to benefit from strong commodity exports and a robust labour market. Growth is projected to remain steady, supported by domestic consumption and investment in infrastructure. New Zealand the economy is expected to grow moderately, driven by strong agricultural exports and tourism. The country continues to focus on sustainability and innovation to drive long-term growth.

Tony Hines: 4:15

As we move into 2025, the global economic landscape is marked by a mix of challenges and opportunities. Europe's facing sluggish growth and political uncertainty. The US contends with inflationary pressures and the policy changes by the incoming president and his administration, and Asia, led by China, navigates trade tensions, while Australasia benefits from strong exports and robust domestic markets. Each region's unique challenges and strengths will shape the economic trajectories in the coming year. India, meanwhile, is expected to be one of the fastest-growing major economies in 2025, with growth projected at about 6%. Key drivers include strong domestic consumption, a young and growing workforce and significant investment in infrastructure and technology. The government is also implementing reforms to improve the business environment and attract foreign investment.

Tony Hines: 5:11

As we move into 2025, the German manufacturing industry faces several challenges. Production is expected to decline for the third consecutive year, with no significant recovery in sight. Key sectors like car manufacturing and mechanical and electrical engineering have been notable in their falls in production. Despite these challenges, germany remains a significant player in the global manufacturing market. It accounts for about 20% of its GDP. The industry employs over 5 million people and it's the fourth largest exporter of manufactured goods worldwide. However, competitiveness has been declining and there are no signs of improvement in the short term. On a positive note, the push towards Industry 4 is expected to create 390,000 new jobs by 2025. It was stated previously, the shift towards digitalisation and automation could help revitalise the industry in the longer term.

Tony Hines: 6:13

As we move into 2025, the UK economy faces a mix of challenges and opportunities. Growth has been sluggish, with GDP growth for quarter three in 2024 at just 0.1%, but in quarter four it's expected to be zero. Consumer confidence has been under pressure and there are no signs of stabilisation. Inflation is expected to moderate and might potentially fall by the end of 2025. Interest rates are also projected to decrease, but this is optimistic and recent signs is that the economy is struggling and it's likely to be suboptimal in its production output. As a consequence, inflation could actually rise and so could interest rates. So not clear-cut really. Different reports give different evidence to support their claims. Overall, while the UK economy is navigating a challenging environment, there may be glimmers of hope, but it requires investment to drive up output. The recent budget by the incoming Labour government did little to help output growth or investment, and many retailers and manufacturers included, are sceptical that any of the policies implemented by the current government will actually do what they aim to achieve, which is increase output and growth.

Tony Hines: 7:47

Now let's take a look at some of the numbers for exports, and the latest numbers we have from the World Trade Organization refer to 2023. So we're going to take a look at the 2023 figures and just see what's happening, and that will inform our understanding of exports around the globe. Now, if we look at the world's biggest exporters, we'll get some indications of the size of goods and how it's changed in 2023. Size of goods and how it's changed in 2023. The top 30 we're going to look at and they're worth 19.7 trillion and the world total of exports is 23.8 trillion. They were the 2023 figures from the World Trade Organization, the WTO. Now, if you look at how that breaks down, China was the biggest exporter at 3.38 trillion and the United States 2.02 trillion. So if you think about those two big countries and the trade that they're doing in exports, you can see that China's overtaken the US and it's significant 3.38 against 2.02.

Tony Hines: 8:59

And then, if we move down to Europe and we take a look at what's happening in Europe, it's quite interesting because Germany is the biggest exporter at 1.69 trillion, and then you've got Italy at 677 billion, france at 648 billion, the Netherlands at 935 billion, turkey is included in this grouping here at 256 billion, russia at 424 billion these are all dollar figures, by the way Switzerland at 420 billion, poland at 382, the UK 521 billion and Spain at 423 billion, and then you've got Czechia at 255 billion, belgium 562 billion. So Belgium exports more than the United Kingdom and Poland at 382 billion. So the UK is about the size of. If we look around the globe and look for a comparison figure. It's lower than hong kong, which is 574 billion. It's higher than singapore, which is 476 billion. It's lower than korea, south korea, which is 632 billion, vietnam's at 354 billion, thailand 285, malaysia 313, japan 717, indonesia 259, india 432 billion and Taiwan 432 billion. So you can see that the UK is probably in the lower middle grouping. And if you look at Brazil 340 billion, united Arab Emirates 488, and Saudi Arabia 322 billion.

Tony Hines: 10:36

So if you think exports from the UK are doing particularly well, they're actually quite low in comparison to some of these countries, and some of the up-and-coming countries are on a quite an upward trajectory. Australia was $371 billion, which is really good, I think, for the size of the population in that country. Canada was 569. So the UK is lower than Canada, lower than Hong Kong, above Singapore, lower than South Korea, above Vietnam, above Taiwan, above Indonesia, lower than Japan, above India and way, way lower than China. Of course, you'd expect that China's a much bigger exporting nation now. It's about six times more than the United Kingdom, and the United States is about four times more than the United Kingdom and Germany is, for all its woes that, you hear, is still three times the size of Britain when it comes to exports. So they're quite solitary, these figures, really, and obviously export growth is something that the UK could do with a lot more of.

Tony Hines: 11:59

Well, let's turn our attention right now to some of the biggest news stories of the week, impacting global supply chains. Music Well, the Brazilian authorities have halted the construction of a factory for Chinese electric vehicles made by BYD. They say that workers lived in conditions comparable to slavery. More than 160 workers have been rescued in Brazil's northeastern state of Bahia, according to a statement from the Public Labour Prosecutor's Office, mpt, allegedly degrading environment with passports and salaries withheld by a building company. Byd said in a statement that it had cut ties with the firm involved and it remained committed to full compliance with Brazilian legislation. This factory was scheduled to be operational by March 2025 and was set to be BYD's first EV plant outside of Asia.

Tony Hines: 13:04

Uk water supply has been a problem for some considerable time, but water companies in England have been fined just £2 by Ofwat since 2021 for breaching regulations. Many think this is outrageous. I think that's the only word for it. Offwatt, of course, has failed in its regulation of the water companies, and that's evidenced by all the spillages of raw sewage into rivers and seas. And, of course, we still have pollution runoff from roads and, of course, from farm fields. So serious problems mounting debt, dividends paid and water company bosses well reaping it in making lots of money for failure Of what has the power to fine water companies 10% of their annual turnover if they break the rules. The fine can be reduced if water companies agree to compensation packages for customers. Since March 2021, offwater has issued fines against only two companies Thames Water and Welsh Water, and both were fined £1. Neither of these fines were issued in relation to any sewage dumping. Neither of these fines were issued in relation to any sewage dumping. Thames Water was fined a pound in 2021 for data errors that led to some customers being charged incorrectly. Ofwat originally threatened Thames Water with a fine equivalent to 3% of its turnover, but that never came to fruition. In 2024, welsh Water was fined a pound for misreporting data on leakages over several years. No-transcript. It was reduced to just a pound after a compensation and investment package was agreed by Welsh Water with Ofwat, which they said was worth £73 million to customers.

Tony Hines: 15:00

Many think that the failure of Ofwat to hold water companies to account means they're breaching their statutory duty, and the record is not good, as the raw sewage is still being dumped, with record numbers 464,056 times in 2023 and sometimes in dry weather, not always when it's wet, flooding or storm damage. So storm drains working all the time, by the sounds of things. The only time they're allowed to release untreated sewage into the environment is in exceptional periods of rainfall and systems become overwhelmed. But evidence suggests it's happening more frequently, and illegally. So the regulator not regulating at all. Time for a change.

Tony Hines: 15:48

Many think More action, less cosying up when it comes to policy. Many think that common sense should prevail when it comes to governments. They need to focus attention on food security and food supply, energy security and energy supply, and they need to obviously have clean water, clean rivers and clean storage areas. And those are the policies that many want to see enacted, rather than the many pie-in-the-sky policies which are just unachievable and expensive. So when will governments learn to do things better? Well, who knows? The United Kingdom currently is set to agree a policy of 2.4% spending on its armed forces and defence. The United Kingdom has dropped from 10th place from 4th place in 2022. And the incoming President of the United States has already said he wants European countries to spend the equivalent of 5% of GDP on defence and in the current climate, well, even that doesn't really sound a lot, does it?

Tony Hines: 16:57

Recent attacks by Israel on Yemen's airport in the capital, sana'a, have drawn retaliation from the Houthis firing missiles at Tel Aviv. And, of course, the Houthis are still attacking ships in the Red Sea, and that's causing many ships still to sail the long route around the Cape of Good Hope. Israel Defence Forces said a missile was shot down by air defences aimed at Ben Gurion Airport, and I think they can probably expect to come under more fire from the Iran-backed Houthi rebels. It was reported this week that 20 energy firms have made £483 billion worth of profit since the start of the energy bill crisis. These figures were stated by the End Fuel Poverty Coalition profit tracker, and that examined profits made by a sample of companies, including energy producers through to firms that control the energy grid, as well as suppliers.

Tony Hines: 17:58

An increasing number of shops are facing a very difficult new year. Sales in the run-up to Christmas have not been as high as expected, and that's putting pressure on the stores, along with the increased national insurance costs for employment and, of course, the likely increase in rates that they're facing come April. So the first quarter is going to be quite tough for retail in the United Kingdom and of course, those increasing costs mean inflation for prices in the stores. As those struggling stores fight for survival, most councils in England are likely to increase their business rates and that's going to put pressure on the cost base for those stores.

Tony Hines: 18:50

A joint statement by the European Commission and the High Representative on the investigation into damaged electricity and data cables in the Baltic Sea on Boxing Day made a statement that said Yesterday's incident involving undersea cables in the Baltic Sea is the latest in a series of suspected attacks on critical infrastructure. We commend the Finnish authorities for their swift action in boarding the suspected vessel. We're working with the Finnish authorities on the ongoing investigation. We stand in full solidarity with Finland, estonia and Germany. We strongly condemn any deliberate destruction of Europe's critical infrastructure. The suspected vessel is part of Russia's shadow fleet, which threatens security and the environment. Part of Russia's Shadow Fleet, which threatens security and the environment While funding Russia's war budget. We will propose further measures, including sanctions, to target the fleet. In response to these incidents, we're strengthening efforts to protect undersea cables, including enhanced information exchange, new detection technologies, as well as the undersea repair capabilities and international cooperation. We remain committed to ensuring the resilience and security of our critical infrastructure. Presently, there's no risk to security of electricity or supply in the region.

Tony Hines: 20:06

Well interesting, isn't it? It's almost like a rogue state in operation, isn't it, causing damage and havoc everywhere. It's about the time in our development in the world that people learned that cooperation is a much better method of improving everybody's opportunities rather than pursuing conflict. Let's hope 2025 has some better news in store for us and, of of course, makes everybody's life easier, especially in the world of shipping and supply chains.

Tony Hines: 20:44

The incoming President of the United States, donald Trump, has said that the European Union must promise to buy large-scale amounts of US oil and gas or face tariffs. The EU doesn't want a trade war with the United States and is looking for ways to do more business, but Trump has made it clear that the European Union must make up their tremendous deficit with the United States by making large-scale purchases of oil and gas. Otherwise it will be tariffs. This was a statement on its Truth Social platform. The European Commission President, ursula von der Leyen, said in November that the EU would consider buying more gas from the US. It still gets lots of gas LNG from Russia, so it would make sense to replace that gas with US LNG and it will bring energy costs down for the European Union. The US is already the biggest supplier of LNG and oil to the European Union in the first part of 2024. It supplied about 48% of the bloc's LNG import about 48% of the block's LNG import whereas Russia supplied about 16%. Trump threatened a blanket tariff of 20% on all non-Chinese US imports last month.

Tony Hines: 22:03

Walmart said it's likely to miss its target to reduce emissions by the end of the decade, and it's blamed energy policy and infrastructure problems, along with the availability of low-carbon technologies. It's the world's largest company by revenue and it's a very influential corporate leader, but it now joins a growing number of companies that have acknowledged they can't meet their climate pledges in the time frames they've set. Walmart did promise to cut greenhouse gas emissions from their operations by 35% in 2025, and 65% by 2030, compared with its 2015 levels, but an update published earlier in the month said these targets now appear to be out of reach. A spokesman said we anticipate achieving our near and mid-term emissions reduction target later than our 2025 and 2030 target dates. They said they'll be revising the goals next year. Its aim is to achieve zero emissions across its global operations by 2040, and global emissions have to fall 43% by the end of the decade to curb global warming to no more than one and a half percent above pre-industrial levels. That was the target set by the Paris Agreement the Paris Accord in 2015.

Tony Hines: 23:27

Walmart's business has been expanding and it's difficult trying to reduce emissions as new stores open and goods are shipped. The global revenue has grown by 6% to 648 billion in the year to January 2024 and operating emissions rose in 2023 by 3.9% to 15.1 million tonnes. There are three drivers of these emission rises Pollution from refrigerants used to chill foods and air conditioning rose by 5.3% year on year and this is largely because of leaks from ageing equipment in the United States and Mexico. Transport fuel emissions rose by 10% in 2023 as the trucking fleet expanded and took more business from third-party carriers. And Walmart said it supplied 4.8% of its global electricity with renewables in 2023, on track for a target of half by 2025. But the purchase of renewable energy was outpaced by the overall business growth. So there's still a commitment to reduce those emissions, but the target date is likely to move further into the future.

Tony Hines: 24:46

Well, that's it for this week. I hope you've enjoyed this episode. Looking at the economic outlook in the year ahead, and we wish you all a successful, prosperous and peaceful new year. Subscribe to Chain Reaction and you'll be first to know when new episodes are coming your way. I look forward to having you along in 2025. I'm signing off right now. I'm Tony Hines and I'll see you next time in the Chain Reaction Podcast. Bye for now. You've been listening to the chain reaction podcast, written, presented and produced by tony hines.