Staff Reporter
Goldman Sachs has shared its seven key macroeconomic predictions for 2025, highlighting a year likely impacted by relaxed financial conditions, ongoing interest rate cuts, and geopolitical tensions.
The investment bank expects distinct growth trajectories for the US, Euro area, and China, with the US projected to lead among developed markets.
- Global GDP Growth: Goldman Sachs anticipates solid global real GDP growth of 2.7% year-over-year in 2025, fueled by increasing real disposable household incomes and easing financial conditions.
The report emphasizes the impact of interest rate cuts, noting that “US growth is likely to continue outpacing its developed market peers due to significantly stronger productivity growth.” Core inflation is expected to reach target levels across developed markets by the end of 2025.
- US Economic Outlook: The bank predicts above-consensus US GDP growth of 2.4% in 2025, driven by robust income growth and financial easing. Core PCE inflation is expected to slow to 2.4% by December 2025, reflecting a further decline in shelter inflation and easing wage pressures, along with a moderate increase from higher tariffs.
Additionally, Goldman Sachs forecasts that the unemployment rate will decrease to 4% by the year’s end.
- Federal Reserve Policy: Goldman Sachs expects the Federal Reserve to make three rate cuts in 2025, starting with a 25 basis point cut in March, followed by additional cuts in June and September.
This would bring the terminal rate down to between 3.5% and 3.75%. The bank also predicts that the Fed will begin tapering its balance sheet runoff in January, aiming to complete the process by the second quarter of 2025.
- Euro Area Growth: Goldman Sachs forecasts below-consensus GDP growth of 0.8% for the Euro area, citing “ongoing structural challenges in the manufacturing sector” due to high energy prices and competitive pressures from China.
Fiscal tightening and uncertainties in trade policy are expected to hinder growth. Inflation is projected to return to 2% by the end of the year, with a gradual easing in services inflation.
- ECB Policy Outlook: The European Central Bank is expected to implement a series of 25 basis point rate cuts, bringing the policy rate down to 1.75% by July 2025. However, Goldman Sachs warns of potential downside risks, indicating that “faster and deeper cuts” may be required if growth and inflation continue to weaken.
- China’s Economic Slowdown: Goldman Sachs forecasts that China’s real GDP growth will slow to 4.5% in 2025, as policy easing measures struggle to offset weak domestic consumption, challenges in the property market, and the effects of higher US tariffs.
The firm remains cautious about China’s long-term growth outlook, citing several structural issues, including declining demographics, a multi-year debt deleveraging trend, and the global shift towards supply chain de-risking.
- US Policy and Geopolitical Risks: Goldman Sachs urges investors to keep a close eye on potential changes in US policy and geopolitical events, especially if Donald Trump wins a second term. Key risks include increased tariffs on China and automobiles, reduced immigration, tax cuts, and regulatory rollbacks.
While Goldman notes that tax reductions could stimulate growth, they caution that “the drag from higher tariffs” may counterbalance those benefits, particularly impacting Europe and China more severely. The report also highlights risks related to the situation in the Middle East, the ongoing Russia-Ukraine conflict, and US-China relations.
