Investing.com — Goldman Sachs has outlined its top seven macroeconomic predictions for 2025, forecasting a year shaped by easing financial conditions, continued rate cuts, and geopolitical uncertainties.
The investment bank anticipates diverging growth paths between the US, Euro area, and China, with the US expected to outperform its developed market peers.
1) Global GDP Growth: Goldman Sachs projects solid global real GDP growth of 2.7% year-over-year in 2025, driven by rising real disposable household incomes and loosening financial conditions.
The report highlights the role of rate cuts, adding that “US growth is likely to continue outpacing its developed market (DM) peers given its significantly stronger productivity growth.” Core inflation is expected to return to target levels across developed markets by the end of 2025.
2) US Economic Outlook: Goldman expects above-consensus US GDP growth of 2.4% in 2025, citing robust income growth and financial easing. Core PCE inflation is forecast to slow to 2.4% by December 2025, “reflecting further cooling in shelter inflation and easing wage pressures but a moderate boost from higher tariffs.”
The bank also predicts the unemployment rate will edge down to 4% by the end of the year.
3) Federal Reserve Policy: Goldman Sachs anticipates the Federal Reserve will implement three rate cuts in 2025, with the first 25bp cut arriving in March, followed by additional cuts in June and September.
This would bring the terminal rate to 3.5-3.75%. The bank also expects the Fed to taper its balance sheet runoff in January and conclude it by the second quarter of 2025.
4) Euro Area Growth: Goldman projects below-consensus GDP growth of 0.8% for the Euro area, reflecting “continued structural headwinds in the manufacturing sector” due to high energy prices and competitive pressure from China.
Fiscal tightening and trade policy uncertainties are expected to weigh on growth. Inflation is forecast to return to 2% by the end of the year, with a gradual cooling in services inflation.
5) ECB Policy Outlook: The European Central Bank is expected to proceed with sequential 25bp rate cuts, bringing the policy rate to 1.75% by July 2025. However, Goldman notes potential downside risks, cautioning that “faster and deeper cuts” could be necessary if growth and inflation weaken further.
6) China’s Economic Slowdown: In China, Goldman Sachs predicts real GDP growth will slow to 4.5% in 2025, as policy easing measures fail to fully counterbalance weak domestic consumption, property market struggles, and the impact of higher US tariffs.
“Over the longer term, we remain cautious on China’s growth outlook given several structural challenges, including deteriorating demographics, a multi-year debt deleveraging trend, and global supply chain de-risking,” the Wall Street firm noted.
7) US Policy and Geopolitical Risks: Lastly, Goldman advises investors to closely monitor US policy changes and geopolitical developments, particularly if Donald Trump secures a second term.
Key risks include higher tariffs on China and autos, lower immigration, tax cuts, and regulatory rollbacks.
Goldman warns that while tax reductions could boost growth, “the drag from higher tariffs” might offset those gains, with Europe and China facing larger economic hits. The report also flags risks stemming from the situation in the Middle East, the Russia-Ukraine war, and US-China relations.