KUALA LUMPUR: Policy uncertainties after the presidential election in the United States dominate the economic outlook and damaging growth prospects, according to an S&P Global Market Intelligence Report.
S&P Global Market Intelligence global economist Ken Wattret said heading into 2025, the focus is squarely on post-election policy shifts in the U.S. and their broader economic implications.
"With renewed inflationary pressures expected to pause the U.S. Federal Reserve's (Fed) easing cycle, global financial conditions are going to be much less accommodative than previously expected. This spells trouble for economic growth; we are lowering our forecasts pretty much across the board," said Wattret.
The report provided the top 10 economic insights for next year.
In the U.S., it said that downside risks have increased, although its economy is still forecast to experience a soft landing. The risks are related to labour shortages and potential tariffs.
The Federal Reserve is expected to pause its easing cycle in mid-2025.
Growth in China is poised to slow, impacted by a potential increase in tariffs on exports to the U.S. and property sector challenges.
"Despite additional stimulus measures, annual gross domestic product (GDP) is likely to fall short of the government's target," it said.
In Western Europe, it said its economies face increased risks of technical recession due to potential disruption to traditional trade patterns and political instability. Central banks in the region are likely to continue to lower their policy rates.
Meanwhile, merging economies will contend with less favourable financial conditions. Key growth drivers in some regions will differ from the norm.
"Renewed inflationary pressures are expected in the U.S. given the expected policy shifts, while disinflationary forces are forecast to persist in Western Europe and mainland China.
"Goods inflation is expected to remain low in the very short term, but should tariffs increase, they will exert upward pressure in 2025. A further moderation in services inflation will therefore be key to keeping core inflation rates low," it said.
The report also noted that crude oil and non-energy commodity prices are forecast to mitigate some of the inflationary impetus should tariffs increase.
It added that the projected pause in monetary policy easing by the Fed means less accommodative global financial conditions, dampening growth along with structural headwinds.
"The dollar's elevation will persist. The Mexican peso's underperformance is expected to continue, while widening interest rate differentials and weak economic conditions will weigh on the euro and UK pound. The yen is forecast to outperform, given continued monetary policy divergence.
"Persistent high fiscal deficits will aggravate already elevated debt burdens, with less favourable relative growth and interest rate dynamics posing an increasing risk to debt sustainability."