The global economy is set for another year of growth, despite potentially seismic policy changes in the U.S. and ongoing geopolitical tensions in the Middle East and Europe, according to the Mastercard Economics Institute’s “Economic Outlook 2025: Steering through change,” released today.
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The bottom line: Continued growth in global gross domestic product, forecasting a 3.2% increase as compared with 3.1% in 2023, led by the U.S., India and the six countries of the Arabian Peninsula’s Gulf Cooperation Council. Inflation for services is expected to ease, although the tariffs proposed by the incoming U.S. administration pose a risk for the price of goods.
But the numbers don’t tell the whole story. In its analysis, the institute’s experts uncovered several trends reshaping how we live, work, pay and play. Here are three insights.
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01
Trading down
Inflation is slowing, but prices are still higher, contributing to what we might call economic PTSD. People are prioritizing good deals, particularly in two sectors: travel and apparel. Destinations that offer similar experiences for more value — say, Bacalar, a breezy gem on the shores of the Lagoon of Seven Colors in southeastern Mexico, instead of the iconic but overpriced Tulum.
Annual hotel transaction growth at some of these “travel twins” is nine percentage points higher compared to their more well-known counterparts. Affordability is in fashion, too — quite literally. Spending growth on mass apparel brands is outpacing high-end goods in 22 of the 26 countries measured in the report.
02
Follow the money
Migration remains a significant global force, driven by people searching for better economic opportunities or seeking refuge from violence and war. Despite the loss of human capital, many low- and middle-income countries have found a lifeline in remittances, which surged from $128 billion in 2000 to $857 billion in 2023, with an estimated growth of 3% this year and next, according to the World Bank.
The U.S.-Mexico corridor is the world’s largest remittance pipeline, and for lower-income families, this money can represent about a third of their annual income. Changes in immigration policy may slow migration going forward, but continued digitalization of what has been a traditionally slow and opaque remittance system is making it easier than ever to send money home.
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03
Comeback queens
Women left the workforce in droves during the pandemic, but they’re back – and ironically, some of the cultural changes triggered by lockdowns, such as the normalization of remote work, may benefit them more, expanding job opportunities and easing the work-life balance.
A Mastercard Economics Institute analysis of OECD data shows that the percentage of the population aged 25 to 54 looking for work has exceeded 2019 levels for women in 38 out of 46 countries in the sample, while only 23 of 45 countries show a higher percentage rate for men. In India, the participation rate for women in this cohort increased by 12 percentage points from 2019 to 2023, compared with just one percentage point for men.
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REPORT
Steering through change
In 2025, the global economy will be defined by shifts in monetary policy, fiscal policy and a move toward equilibrium rates for growth and inflation, according to the Mastercard Economics Institute. Learn about MEI’s key forecasts, emerging trends and regional insights in “Economic Outlook 2025.”Read more
Source – Mastercard
