Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/334589 
Year of Publication: 
2025
Series/Report no.: 
Kiel Institute Economic Outlook No. 128
Publisher: 
Kiel Institute for the World Economy, Kiel
Abstract: 
Global output growth slowed down only slightly and proved resilient amid trade conflicts and the resulting increase in uncertainty. World trade has even risen sharply. Both trade and investment continue to be buoyed by the boom in AI-related technologies. Monetary policy in the United States is expected to be eased further, while in the euro area policy rates are likely to remain at their current level for the time being. At the same time, fiscal policy will be expansionary on aggregate-driven in part by substantial increases in defense spending in many countries in response to the altered geopolitical environment. However, the dampening effects of US tariff policy are likely to become increasingly apparent, especially since US tariffs can be expected to remain permanently high. Against this backdrop, we expect the global economic expansion to gradually slow down further over the coming months, as growth in the United States and the euro area is likely to temporarily weaken and the business outlook in China has recently deteriorated. Given the robust developments so far, we have nevertheless revised our forecast for global output - based on purchasing power parities - markedly upwards compared with our autumn forecast, by 0.3 percentage points each for both this year and next, to 3.3 percent and 3.1 percent, respectively. For 2027, we now expect global growth to accelerate to 3.2 percent. The decline in inflation came to a halt in 2025; in the United States, prices have even increased more strongly due to tariffs, and there remains a risk that monetary policy will eventually have to tighten in response.
Subjects: 
China
Europe
Business Cycle World
European Union & Euro
Fiscal Policy & National Budgets
International Finance
International Trade
Labor Market
Migration
Monetary Policy
Document Type: 
Article

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