Investing.com — Goldman Sachs has released its top macroeconomic forecasts for 2025, predicting a year characterized by weakening financial conditions, continued deflation, and global uncertainty.
The investment bank expects different growth trends between the US, the Euro area, and China, with the US expected to outperform its developed market peers.
1) Global GDP growth: Goldman Sachs projects robust global real GDP growth by 2.7% year-on-year to 2025, driven by rising real household incomes and easing financial conditions.
The report emphasizes the role of the rate cut, adding that “US growth is likely to continue to exceed its developed market (DM) peers given very strong growth in production.” Core inflation is expected to return to target levels in all developed markets by the end of 2025.
2) US Economic Outlook: Goldman expects US GDP growth of more than 2.4% in 2025, citing strong income growth and fiscal deficit. PCE inflation is forecast to slow to 2.4% in December 2025, “reflecting further cooling in the inflation environment and easing wage pressures but moderate increases from higher taxes.”
The bank also predicts that the unemployment rate will drop to 4% by the end of the year.
3) Federal Reserve Policy: Goldman Sachs expects that the Federal Reserve will implement three rate cuts in 2025, with the first 25bp cut coming in March, followed by additional cuts in June and September.
This will bring the terminal rate to 3.5-3.75%. The bank also expects the Fed to release its balance sheet in January and complete the second quarter of 2025.
4) Growth of the Euro Area: Goldman projects below-consensus GDP growth of 0.8% for the Euro area, indicating “continued structural headwinds in the manufacturing sector” due to high energy prices and competitive pressure from China.
Fiscal tightening and trade policy uncertainty are expected to moderate 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 carry out a series of rate cuts of 25bp, bringing the policy rate to 1.75% in July 2025. However, Goldman notes potential risks, warning that “rapid reductions and swings” may be necessary if growth and inflation decreases. especially.
6) China's Economic Slowdown: In China, Goldman Sachs predicts real GDP growth will slow to 4.5% in 2025, as measures to reduce policy fail to fully counter weak domestic consumption, struggling property markets, and the impact of high US tariffs .
“In the long term, we remain cautious on China's growth due to several challenges, including a declining population, a multi-year debt reduction mechanism, and the elimination of global supply risks,” the Wall Street firm said.
7) US Policy and Geopolitical Risks: Finally, Goldman advises investors to closely monitor US policy changes and geopolitical developments, especially if Donald Trump retains a second term.
Key risks include high prices in China and cars, low immigration, tax cuts, and legal backlash.
Goldman warns that while tax cuts could boost growth, “the drag on higher prices” could erode those gains, with Europe and China facing a major economic blow. The report also lays out risks from the situation in the Middle East, the Russia-Ukraine war, and the US-China relationship.