Coface Risk Barometer: The Global Economy Will Grow Slightly Despite Uncertainties

What will 2025 look like? Although last year’s electoral uncertainty may have been partially resolved, the horizon remains unclear, and risks have never been greater. While U.S. politics could negatively impact numerous global economies, China continues to face a significant surplus of production capacity, and many developing countries are threatened by dollar appreciation and capital outflows. Europe, alongside existing challenges and limited budgetary options, is facing new issues in its relations with its American ally. In such an environment, the risk barometer by country and sector for this year, published by Coface, predicts a stabilization of global economic activity.

Confirmed Transatlantic Divergence

The year 2025 is expected to confirm the divergence between the U.S. economy and the Eurozone. Growth in the U.S. is expected to remain stable due to the resilience of American household consumption, supported by a strong labor market and the effects of rising real estate and stock prices. Deregulation and tax cuts announced by President Donald Trump are expected to further stimulate investment.

On the other hand, Coface predicts that economic growth in Europe will be limited due to challenges in the industry and construction sectors. Despite falling inflation, household consumption is likely to remain weak due to a lack of consumer confidence, fueled by political uncertainty in several countries, such as France and Germany. Economic growth in these countries, as well as in Italy, is expected to remain low, while it will significantly slow down in Spain.

European Automotive Industry Runs Out of Fuel

The European automotive industry faced a serious slowdown during 2024. Demand for passenger vehicles stagnated, while production indicators point to an almost complete halt in production activity in most countries in the region. New vehicle registrations increased by a modest 0.8 percent year-on-year, while in the second half of the year, they recorded a decline of 3 percent.

2025 does not bring optimistic forecasts for the European automotive industry, which is likely to come under pressure from increasingly strong competition from China and uncertainty in the U.S. market, along with the threat of the introduction of customs barriers.

Trump’s Election Changes Power Relations for Many Developing Countries

Developing economies are facing an extremely unfavorable situation due to the rapid appreciation of the dollar and massive capital outflows in several countries. Trump’s election has reshaped global monetary and financial prospects and further increased the vulnerability of the most sensitive economies. Countries with high dollar-denominated debt are particularly affected, as they could experience a sharp deterioration in economic conditions due to higher interest rates and/or currency depreciation.

An example of this is the strong depreciation of the Brazilian real at the end of 2024, which weakened by 10 percent between the end of November and December 25, despite the increase in interest rates by the Brazilian central bank, demonstrating how countries with significant external and/or fiscal imbalances are exposed to market turbulence.

China is not immune to these challenges either. Without major new stimuli, its economic growth is likely to significantly slow down after officially recorded 5 percent last year (for this year, Coface forecasts 4.3 percent). U.S. tariffs continue to pose a serious risk to China – although their exact scope and timing are uncertain, their impact will certainly be (very) negative.

Stable but Limited Global Growth

Despite an increasingly uncertain environment, Coface forecasts a slight improvement in global growth in 2025 to 2.7 percent, compared to the previous estimate of 2.6 percent. This increase mainly stems from the unexpected resilience of the U.S. economy, which compensates for the long-standing weakness of the Eurozone.

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