Investing.com -- In its "2025 Global Economic Outlook" note this week, JPMorgan offered an optimistic yet cautious view of the global economy, highlighting resilience despite persistent inflation and elevated interest rates.
The bank said that while growth has exceeded expectations, risks lie ahead.
They said the global economy demonstrated surprising strength in 2024, with nominal GDP growing over 5%, supported by easing financial conditions despite restrictive monetary policies.
"Profit margins were able to remain near their peaks, and labor income and wealth gains maintained household sector health," noted JPMorgan.
However, they noted that divergent trends emerged, with the U.S. economy outperforming while global manufacturing, apart from the tech sector, showed weakness.
JPMorgan anticipates continued resilience in 2025, with global growth persisting and core CPI inflation hovering around 3%.
Central banks are expected to diverge in their monetary policies, with substantial rate cuts likely in Western Europe and Canada, contrasted by limited action from the U.S. Federal Reserve and most emerging market central banks.
Key risks are said to stem from U.S. policy shifts under a Republican administration, which JPMorgan predicts will increase global uncertainty.
Expected U.S. tariffs on China and immigration restrictions are also expected to create a "negative supply shock," raising inflation and slowing central bank easing globally.
However, JPMorgan sees U.S. fiscal and regulatory changes boosting domestic GDP growth by 0.4 percentage points in 2025, partially offsetting these impacts.
China, facing a sharp slowdown, is projected by JPMorgan to see its GDP growth reduced by 0.8 percentage points.
While additional fiscal stimulus and currency depreciation may mitigate the effects, the bank adds that the risk of a broader negative shock to global business sentiment remains significant.
JPMorgan warns that an aggressive U.S. inward turn, coupled with retaliation, could amplify economic disruption, posing a major threat to the global expansion.