An outlook for the economy in 2025: Key trends for finance teams

They say no plan survives first contact with the enemy. While the global economy isn’t exactly the enemy of finance teams worldwide, it can have the same impact on your plans. You could spend weeks building detailed forecasts based on all available data, only for a single election result or financial trend to upheave everything and force you to adapt.

After all, it wasn’t all that long ago that a certain worldwide pandemic threw everyone’s plans into disarray for several years.

That’s why it’s important to start the year right by looking ahead at what might come next.

U.S. economic outlook for 2025

Whether you’re operating in the U.S. or in an economy closely tied to this economic superpower, there will be a few important indicators to watch out for in 2025.

U.S. election outcome and a Republican Congress

Only weeks after winning the 2024 presidential election, Donald Trump is already making promises regarding the country’s (and the world’s) financial future, like a 25% tariff on Canadian and Mexican imports. The president-elect is unsurprisingly making waves and his election promises to impact the global economy.

And with a Republican majority in both Congress and the House, these promises are more likely to become reality.

Projections on how these changes will affect the global economy vary, but the tariffs alone could reduce American GDP by up to 0.4% and employment by 344,900 jobs, according to the Tax Foundation. While U.S-based manufacturers and other organizations might see an initial boost from a reduction in international competition and more protectionism from the White House, this could create a broader economic downturn.

Organizations operating outside the U.S. might see increased costs and lower profitability, especially if they have a strong customer base there.

2.5% GDP growth projections

While GDP growth between 2-3% is considered normal for developed economies, a difference of even half a percent from year to year can be the beginning of a chain reaction that impacts economic outlooks across markets. Where 2024’s GDP settled at a respectable 3.1% annual growth rate according to the Bureau of Economic Analysis, projections from the Wolters Kluewer Blue Chip Survey (collecting forecasts from over 50 economists) place GDP annual growth for 2025 at 2.5%.

While these projections still show overall growth in 2025, a cooling economy could lead to less inflation, better labor markets, and, most importantly, a final confirmation that the world dodged a recession.

Tax cuts and deregulation

Many economists predict that tax cuts and deregulation will be two hallmarks of American policy in 2025—likely funded by Trump’s proposed tariffs.

Deregulation means organizations will be dealing with a more business-friendly administration, with regulations on environmental protection and mergers and acquisitions being two primary areas of interest in the coming year. This could cause ESG reporting and similar requirements to become less relevant than in previous years.

As far as tax cuts? A proposed cut of up to 6% in corporate tax rates could lead to an equivalent boost in the S&P 500, meaning a boost to overall economic growth and a better bottom line for finance teams.

Reacting to changes in the global economy means you’re always one step behind. Financial forecasting tools like Prophix can help you create scenarios and forecasts that account for policy changes, economic upheavals, and more. Learn more about financial forecasting software here.

Global economic shifts

Here are a few trends to look out for globally, and how they could affect your operations.

Easing monetary policies

In June 2024, Canada was the first G7 country to lower its interest rates, with the U.S. following suit in September. For many economists, this signals a potential trend of easing monetary policies worldwide in 2025, which could encourage organizations to take more risks and stimulate growth after years of tougher markets.

Emerging markets vs. developed markets

Change is on the horizon in 2025, and that will also be true in emerging markets. In its Emerging Markets Outlook report, the Royal Bank of Canada is projecting a somewhat positive outlook for equities from emerging markets, due to strong currencies, a widening gap in economic growth, and greater diversification.

That being said, the volatility expected in 2025—namely from tariffs and potential trade wars—might make developed markets a safer bet for some organizations.

China’s trajectory made it an economic powerhouse for the last few decades, but it experienced significant challenges throughout 2024. Not least of these was the massive downturn in its property sector, heralded by the bankruptcy of Evergrande and Country Garden, two of the biggest real estate developers in the country.

This, combined with increased efforts to revitalize local manufacturing in markets like the U.S. signals more challenges ahead. Organizations in sectors competing directly with China—like manufacturing and e-commerce—might see this as a windfall. Others who’ve learned to rely on China’s industry might face similar challenges.

Investment and capital trends

2025 might just end up being the year that finance teams and organizations start taking bigger risks again, after years of playing things safe. Here are some indicators that suggest this:

• Accelerating investments in AI: AI might have first started making waves in 2022, but 2024 was really the year for this new technology. Investments in AI startups were up 80% in 2024, despite overall funding being down 15%. Investors are hungry for opportunities and AI is at the top of their list.

• Lower interest rates: Lower rates make borrowing money less expensive, which could lead to an increase in both deal size and frequency in 2025.

• Large cash positions: According research from Goldman Sachs, money market ETFs outpaced bonds and equity markets by the end of 2024. Going into 2025, investors might be looking to deploy these war chests on big opportunities.

Finance teams will need to prepare for a volatile year in 2025. This means forecasts can generally account for positive trends in investing and capital, but they should be expected to adapt to quickly changing factors.

Labor market and productivity

From quiet quitting to remote work, labor market trends have a significant impact on your organization’s goals and financial health. Here are some of the top trends to look out for in this category throughout 2025, according to the World Economic Forum’s Future of Jobs Report:

• AI and automation: 86% of employers surveyed by the WEF expect their businesses to be transformed by AI, while 58% expected similar impacts from robots and other autonomous systems.

• Net increase in total jobs: Despite significant losses (20% and over) in sectors like postal service, data entry, and retail, the WEF predicts an overall net growth of 7% between 2025 and 2030.

• Decrease in talent availability: Only 29% of employers surveyed by the WEF expect the talent pool to grow from 2025 onward, compared to 39% in 2023.

So, what can you do to adapt? If you’re in an industry that’s particularly vulnerable to disruption from AI and don’t already have a plan to harness this—like leveraging AI-powered financial planning and analysis tools—now’s the time. And if you know you’ll have a big recruiting drive in 2025, expect some challenges.

Inflation and interest rates: Projections for 2025

Inflation and interest rates are important economic metrics for global economies and finance teams. According to economists and other experts from Bloomberg, here’s what you can expect in 2025:

• Monetary easing: Interest rate cuts of at least 0.5% are expected in most of the G7, with Japan as a notable exception. Cuts are expected in other regions as well, with a few exceptions, like Brazil and Argentina.

• Tenacious inflation: While inflation might not hit the highs of recent years, it’s still not quite hit the level most central banks expected. So even if most banks are expected to cut rates throughout 2025, it might not happen until later in the year.

Decreased rates may allow more organizations to take riskier bets, but volatility in fiscal policy and inflation means you’ll still need strong cash flow to weather potential storms.

Technology and innovation

AI is the most important trend to watch for in 2025. In previous years, AI tools rose to the forefront in generating hype and investment interest. Widely used tools, from Microsoft Office to the Adobe Suite and Prophix offer AI insights to keep up with the changing expectations that users have of their software.

For organizations operating in this space, 2025 will likely bring more tailwinds, but all industries need to dedicate attention to the growth in AI and examine their processes for disruption. Those who are too slow to adopt AI may fall behind.

Risk factors to monitor in the outlook for economy 2025

Even with a generally positive, if guarded outlook in 2025, there are still important risks to consider, according to this recent article from Reuters:

• Political shifts around the world: Trump wasn’t the only politician to take over from an incumbent in 2024. France, Germany, India, and South Africa are just a few examples of countries that saw a significant political shift. That can mean long-standing policies and regulations could completely change in the coming year, forcing organizations to adapt.

• Geopolitical instability: Local politics and regulations aren’t all that’s been disrupted in 2024. Significant conflicts, from instability in the Middle East to the war in Ukraine show no signs of slowing down and leadership changes in several countries threaten to affect international relations.

Like many economic factors, these risks are far beyond the average organizational leader’s control. That’s why robust forecasting that accounts for these changes—while acknowledging they’re beyond your control—is so crucial.

The critical role of strategic planning in economic forecasting

Strategic planning allows organizations to build a vision that trickles down to every role. It doesn’t just allow for everyone to make decisions that are more in line with organizational goals, it creates a robust knowledge base for every leader to turn to when making important decisions, reacting to change, and fixing problems.

Proactive scenario planning builds standard operating procedures for adjusting to unexpected challenges while capitalizing on previously unrecognized opportunities. Risk assessment plays a key role in this, allowing you to focus your resources on risks with the most likelihood of affecting your organization.

Prophix One, a Financial Performance Platform, is the mission control center of choice for leaders who want robust data automatically sourced from their tool stack, live reporting analytics, and more to plan a rolling, agile strategy for their organization.

Preparing finance teams for 2025

Despite some significant challenges coming to an end in 2024, others loom on the horizon. With most analysts and economists projecting an optimistic—if risky—2025, teams will need to focus on steady improvement for their core operations while keeping an eye out for potential opportunities and disruptions. Additionally, shifting international ties and regulations will likely make multinational operations more challenging in 2025, though they could prove more rewarding for those who can navigate potentially troubled seas.