An economic forecast is a prediction of the evolution of one or more macroeconomic variables, such as gross domestic product, consumption expenditures, investment spending, interest rates, and industry employment. In practice, these predictions are usually made using a model based on a set of assumptions about the behavioral patterns of those variables and not much else.
The current episode of global trade frictions is having a significant effect on the growth prospects for many emerging market and developing economies (EMDE). In 2025, growth is expected to slow in East Asia and Pacific, Latin America and the Caribbean, and Sub-Saharan Africa. In the latter, a decline in global commodity prices and a re-escalation of armed conflict are seen as constraining activity.
In contrast, growth is projected to pick up in South Asia and China, where domestic demand should be supported by continued urbanization and a rising labor force. In both cases, the gains in per capita income will likely be constrained by high trade barriers and long-standing structural weaknesses.
While the determinants of these cyclical trends are complex and subject to ongoing revision, the fundamentals remain solid. As the ECB continues to ease policy, headline inflation is expected to fall toward its target in Europe and core inflation should continue to moderate in the United States.
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