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Economy in 2025:
The Great Uncertainty

Barometer February 2025

Although last year’s election uncertainties have (partially) been resolved, the horizon is still unclear, and risks have rarely been this high. As the world continues to fragment—even within country blocs that once formed a unit—there is no shortage of (geo)economic and financial risks in a year that should also bring its fair share of surprises.

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What Will 2025 Look Like?

At the forefront of concerns are the economic and foreign policies of the new U.S. administration, now inextricably linked. At the time of writing, we are still in the dark about what will actually be decided and implemented in the U.S., but our intuition tells us that the impact of U.S. policy on the global economy—and beyond—will largely be negative.

Transatlantic Divergence

The year 2025 is expected to confirm the divergence between the US economy and the Eurozone...

Europe: Mixed Picture

Weak economic growth is expected in Italy and especially in Germany...

Diverging Monetary Policies

These different developments are likely to lead to potentially varying monetary policies...

Bright Spot Switzerland: Dimming Foreign Trade

At the beginning of 2025, Switzerland retains the best country risk rating that Coface can award. This places it in a small group with Norway, Denmark, and, more recently, Luxembourg. Even though Switzerland’s economic development remains relatively subdued compared to pre-pandemic years, it remains very robust compared to its European neighbors. After growing by 0.7% in 2023, the economy is expected to have expanded by another 1.4% year-over-year. For the current year 2025, Coface forecasts growth of 1.7%. In comparison, the Eurozone grew by only 0.8% in 2024 and is projected to grow by just 1.1% in 2025.

What sets Switzerland apart is its stability. It has a relatively low inflation rate, likely due in part to already high price levels even without gas price increases. Throughout 2024, inflation remained below the Swiss National Bank’s (SNB) 2% target. It is expected to drop to 0.5% in 2025. Due to low price increases, fewer wage adjustments are needed to maintain purchasing power. This results in significantly less uncertainty regarding consumption and investments compared to other European countries, supporting strong consumer spending.

However, the investment picture remains mixed. While construction investments have recovered, capital investments are declining. A key issue remains the challenging economic outlook for Switzerland’s main trading partners, particularly in Europe and China. The SNB’s monetary policy is likely to support investments. Last year, the SNB already cut interest rates by 125 basis points to 0.5%. Further rate cuts to at least 0% are likely this year, significantly lowering financing costs for major investments.

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Country Risk Stability

 

Upgrades ▲

 

•  United Kingdom: Upgraded from A4 to A3

•  Oman: Upgraded from C to B

•  Luxembourg: Upgraded from A2 to A1

•  Guyana: Upgraded from C to B

 
 

Downgrades ▼

 

•  Bangladesh: Downgraded from C to D

•  Botswana: Downgraded from A4 to B

•  Maldives: Downgraded from C to B

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