Global Economy Update February 2025 - CareEdge Ratings
Global Growth Steady; Inflation to Continue Declining
* Global GDP growth forecasted at 3.3% in 2025 (Vs 3.2% in 2024), still lagging behind the historical average of 3.7% recorded from 2010–19.
* Global inflation is projected to ease from 5.7% in 2024 to 4.2% by 2025 and 3.5% by 2026.
* However, trade policy uncertainty and potential tariff effects could disrupt the disinflation process.
Source: IMF World Economic Outlook (WEO- January 2025) Note: P- Projections, E- Estimate
Source: IMF World Economic Outlook (WEO- January 2025) Note: P- Projections, E- Estimate
Divergent Growth Trends
* Key revisions to 2025 projections: US growth revised up by 0.5 pp, while Euro Area growth revised down by 0.2 pp.
* Growth is expected to rise in the Euro Area, Japan, UK and South Africa in 2025 compared to 2024, while India’s growth is expected to remain stable.
* In contrast, growth in China, Brazil and Mexico is projected to slow in 2025 compared to 2024.
China: 2024 GDP Growth Meets Government Target
Source: CEIC, National Bureau of Statistics
Source: CEIC, National Bureau of Statistics
* China’s economic growth in Q4 2024 exceeded market expectations, bringing the full-year real GDP growth to 5%.
* Exports played a key role in supporting the economy, partly driven by front-loading of orders ahead of potential US tariff hikes.
* Amid ongoing property sector slowdown and weak consumption, GDP growth in 2024 was lower than 5.4% growth recorded in 2023.
* Global trade war, with Trump imposing an additional 10% tariff on China and China retaliating with tariffs, is a concerning aspect.
India: Centre Balances Consumption Boost Along with Fiscal Consolidation
Source: Union Budget Documents; CareEdge. Note: (A): Actuals; (RE): Revised Estimate; (BE): Budget Estimate
Source: Union Budget Documents; CareEdge. Note: (A): Actuals; (RE): Revised Estimate; (BE): Budget Estimate
* Union Budget FY26 aims at boosting consumption in the economy via reducing income tax burden.
* Capex focus is expected to continue with budgeted growth of 10.1% (y-o-y) in FY26, taking it to Rs 11.2 trillion.
* Total expenditure is budgeted to decline to 14.2% of GDP in FY26 (Vs 14.6% in FY25); Revex-to-GDP to moderate while capex-to-GDP will be maintained in FY26.
* FY26 fiscal deficit is budgeted at 4.4% of GDP, moderating from 4.8% in FY25
Japan: Interest Payment Burden to Increase with Monetary Policy Normalisation
Source: MoF, Japan, Reuters
Source: MoF, Japan, Sep 24
Korea: Recent Political Turmoil Does Not Pose Significant Near-Term Credit Risks
* The Republic of Korea’s brief encounter with martial law and its subsequent revocation reflects political fault lines as well as institutional resilience, as the government and central bank responded swiftly to the crisis.
* The political turmoil is unlikely to significantly alter Korea’s credit outlook, as government debt is low (around 51% of GDP in 2023) and debt affordability is strong. Further, low external debt (around 39% of GDP in 2023) limits the risks from exchange rate fluctuations.
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