• 2025 Global Outlook: Resilience in Uncertain Times

• China: Trump's return clouds China's outlook for 2025

• Potential slower global growth in the next half of decade

• Vietnam, Malaysia and Indonesia gain more trade with China

• More trade with USA after 2017

• Malaysia on positive edge

2025 Global Outlook: Resilience in Uncertain Times. The global economy is projected to grow 3.2% in 2025. Shifting tides of leadership and policy particularly in USA, are set to pose new challenges in 2025. Notably, President-elect Trump's proposed tariff policies mark a significant step in the growing trend of protectionism.

USA: Second term Trump. The American economy is expected to experience steady growth in 2025, with GDP projected to increase by 2.2% for the full year. Uncertainty around the forecasts is high given unknowns about the extent President-elect Trump's campaign promises will materialise. Growth will be driven by robust consumer spending, which remains the core pillar of the economy, supported by rising real incomes and wealth effects.

China: Trump's return clouds China's outlook for 2025. The world's second-largest economy has displayed early signs of recovery since October 2024, following Beijing's introduction of various stimulus measures, including interest rate reductions. This is promising for China to achieve its 2024 growth target of around 5%, although the potential return of Donald Trump as US president could impact the economy's key drivers in the years ahead

USA still garner one-fifth of global economy. As of recent estimates, the United States accounted for approximately 23.5% of global GDP in 2023, while China contributed about 18.5%. The gap in their global GDP shares has narrowed to its lowest point, at 5.4%, in 2023. Despite China's sluggish growth, its expansion rate remains higher than that of the U.S. Nevertheless, the United States continues to be a dominant global economic power and a key player in geopolitical affairs.

Strengthening the American economy. President-elect Trump is championing and potentially extending his past policy especially the 2017 Tax Cuts & Jobs Act. Trump favours lower taxes for consumers and businesses as to boost domestic economic growth. Also, being a protectionist, he is proposing for further tariff hikes on foreign goods with the intention to increase demand and supply of local goods. Nevertheless, expansion of the USA GDP will bring positive impact to Malaysian economy.

Potential slower global growth in the next half of decade. With intensifying global trade tensions on the horizon, global growth is projected to decelerate further between 2025 and 2030. Escalating tariffs imposed by major economies are expected to significantly dampen global demand and trade volumes. During the 2010-2019 period, average global GDP growth stood at 3.7% annually, briefly rebounding to 4.2% following the pandemic-induced crisis. However, growth had already slowed to 3.5% annually in the pre-pandemic years of 2017-2019. Similarly, global trade volumes grew at an average of 4.6% per year before the pandemic and accelerated to 5.1% post-2021. Yet, during the peak of the Trump administration's trade wars, global trade growth plunged to an average of just 3.6%, underscoring the far-reaching economic consequences of protectionist policies.

Source: BIMB Securities Research - 8 Jan 2025