"You must move forward or you will fall off the bike," warns Beata Javorcik, chief economist of the European Bank for Reconstruction and Development.
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ADVERTISEMENTWill the second Trump presidential term be the key influence on the global economy of 2025?
According to the European Bank for Reconstruction and Development (EBRD), it’s one of many causes for concern.
“The unwinding of globalisation is going to have negative consequences for the global economy,” Beata Javorcik, chief economist at EBRD, told Angela Barnes in the latest episode of The Big Question.
Global economic fragmentation
Beata’s primary concerns for 2025 are the impact of ongoing conflicts and the fragmentation of the global economy. She cited Brexit, the US-China trade war, and Russian sanctions as long-term issues that continue to pose economic risks.
For Europe to prosper, she explained, the bloc needed to take to heart the warnings laid out in Mario Draghi’s 2024 The Future of European Competitiveness report.
“We will not be able to maintain our standards of living if Europe continues down its current path.
“However, paradoxically, the challenges Europe may face in 2025 may bring about a renewed focus and lead to decisive action. It could be a turning point for Europe,” Beata added.
Europe is currently anticipating further news on proposed US trade tariffs, but it isn’t the only development from the US poised to send shockwaves globally.
“If the US Federal Reserve has to maintain high interest rates for an extended period, it will result in increased borrowing costs for emerging markets,” Beata explained.
Developing countries and emerging economies are already heavily burdened by debt accumulated during the pandemic.
“High interest rates greatly increase the cost of servicing such debt. Although inflation has alleviated the debt burden, it remains considerable and is a concern.”
How sanctions affect the Russian economy?
While the future of Russia-US relations remains uncertain, Beata indicated that Russia is starting to suffer from prolonged sanctions.
Although some of Europe’s reduced trade has been partially offset by exports from China and Turkey, it is not a complete substitute.
“These substitute exports lack the technological content needed, and it is evident from market data that foreign entities in these countries choose not to supply the Russian market,” she explained.
She also mentioned that multinational corporations continuing to leave the Russian market has halted new foreign direct investment.
“This means there are fewer knowledge flows,” Beata noted.
“These effects, although not immediate, work slowly and start to significantly impact the Russian economy.”
Where will we see growth in Europe in 2025?
Despite the challenges, Beata remains optimistic about the services sector in emerging Europe.
While AI implementation is set to affect eastern and western European job markets differently, Eastern Europe is expected to excel in the IT services sector.
Source: https://www.euronews.com/business/2025/02/24/now-or-never-moment-is-it-all-economic-doom-and-gloom-for-europe-in-2025
