Executive Summary

As the year comes to a close, the consequences of elections and political shifts are being processed, with markets showing a mixed picture: flat equities in Europe and declining stock prices in the US; meanwhile, the normalization of global interest rates continues, with both the Fed and the ECB cutting rates by 25 basis points.

Increasing living costs, deteriorating public services, migrant flows, and widespread geopolitical instability are raising uncertainty and potentially driving a wedge between populations and their political elites, resulting in political shifts gaining traction across various parts of the world.

With President Trump due to take office on January 20, businesses and analysts are seeking to predict to what his second term might bring in terms of economic policies. The U.S. Federal Reserve has reportedly flagged fewer interest rate cuts, while other leading central banks are cautious about future rate decisions.

The US is tentatively projecting higher than previously estimated growth for next year—but accompanied by meaningfully higher inflation. Consequently, current market expectations are for just a single US rate cut during 2025. By contrast, eurozone real GDP growth is expected to be lower than anticipated at 0.7% in 2024 and 1.1% in 2025, according to the European Central Bank’s (ECB) December projections. The latest ECB projections revise the GDP growth outlook down –0.1 percentage points in 2024 and –0.2 percentage points in 2025.

December has seen a particularly eventful period of political volatility in the eurozone. Germany, Europe’s largest economy and normally a pillar of stability, is facing snap elections next year after Chancellor Olaf Scholz lost a confidence vote on December 16. Meanwhile, France’s President Emmanuel Macron appointed François Bayrou as prime minister on December 13, following a vote of no confidence in Michel Barnier on December 4, during which left- and right-wing opposition politicians combined to defeat the center-right government.

Meanwhile, the UK economy faces headwinds, with some commentators attributing its recent mixed performance in part to businesses’ reaction to government policies announced in October’s budget. These included some £40 billion in tax rises, with an increase in National Insurance contributions among the most significant. On December 19, the Bank of England announced it had downgraded its growth forecast for the final quarter of 2024, from 0.3% to 0% (compared with its forecast of just six weeks before). Meanwhile, the latest Confederation of British Industry (CBI) Growth Indicator, released December 23, suggests that growth expectations are now at their weakest in over two years. Private sector firms expect activity next year to fall in the three months to March (weighted balance of –24%), the CBI states.

Although GDP in the emerging economies has been somewhat higher than in the developed economies, China has been looking to reinvigorate its economy with a series of stimulus measures over recent months. At its Central Economic Work Conference held in mid-December, the government identified insufficient domestic demand as the primary challenge and outlined its economic priorities for 2025. These include boosting domestic demand, stabilizing the real estate sector, and advancing innovation to drive sustainable growth. While the challenges have been identified, analysts are now looking to see what solutions emerge next year. Meanwhile, India’s economy continues to exhibit resilience and growth, with robust performance in key sectors despite global economic headwinds. A GDP growth rate for FY 2024–25 is projected at 6.5%, supported by strong domestic consumption and increased private investments.

As expected, the Fed cut rates on December 18 along with the European Central Bank (ECB)—both by 25 basis points. The Bank of England, meanwhile, held its policy rate at 4.75%, while the Reserve Bank of India maintained the repo rate at 6.5% at their December policy meetings. In contrast, Brazil’s COPOM hiked the Selic rate from 11.25 to 12.25% during its latest meeting on December 10 and anticipated further rises in the New Year.

Consumer confidence has largely stabilized but remains much lower than previously, indicating that consumers are holding off on major purchases. Consumers in developed markets remain cautious, while household spending in emerging economies has accelerated. That said, the US consumer confidence index (Conference Board) increased in November to 111.7, up from 109.6 in October. US retail and food services sales for November (adjusted for seasonal variation and holiday and trading-day differences) were $724.6 billion—a 0.7% increase from October. Consumer confidence in Brazil remains below the neutral 100 mark but ticked up to 95.6 in November (93.0 in October), continuing its upward trend after decreasing for one month. Business confidence fell slightly to 97.4 in November (97.9 in October), reaching its lowest level since June.

Inflation edged up in November for both consumers and producers in developed countries, whereas inflation in developing economies remained largely stable. Overall inflation expectations remain unchanged.

The US consumer price index (CPI) rose 2.7% for the 12 months ending November, after rising 2.6% over the 12 months ending October. Core inflation slightly increased to 3.3% (annualized) in November. Eurozone headline inflation was up to 2.2% in November, mainly due to an uptick in energy prices (0.5% month on month), while core inflation stood at 2.8%. Services inflation was 3.9%, which continues to point to strong domestic price pressures, with wages growth still elevated (4.6% in 2024 Q3). Producer prices have been in positive territory since December but recorded –0.3% month on month and –0.1% year on year in November 2024. UK inflation increased for the second consecutive month, reaching 2.6% (from October’s CPI reading of 2.3%).

Among emerging economies, inflation in China remains low, with the CPI registering a modest 0.2% in November, a slight dip from October’s 0.3%. Meanwhile, producer prices registered a decline of −2.5% in November, compared to −2.9% in the previous month. In India, headline inflation eased to 5.5% in November due to declining fuel prices and slower growth in food prices. In Brazil, inflation climbed to 4.87% in November (4.76% in October), increasing for a third consecutive month and breaching the central bank’s target upper limit (4.50%) for the second time. Mexico saw the inflation rate drop to 4.6% in November (from 4.8% in October), its lowest in eight months, but remaining outside the Central Bank’s target range of 2–4%. Russia’s tight wartime economy continues to be a special case with consumer price inflation elevated at around 9% year on year in November.

Overall, agriculture prices increased in November, while other commodity prices declined. Food prices continue to rise, driven by vegetable oils. Metal prices ended 2024 on a weaker note, as most experienced declines. Gold prices declined and then stabilized at approximately $2,650 per ounce. Oil prices have been declining and reached their lowest point in 2024.

After four months of declines, manufacturing has finally stopped contracting: the manufacturing sector in emerging markets is gaining momentum, while developed economies continue to struggle. Services sectors around the world are showing mixed performance, with the eurozone slipping back into contraction territory.

In the US the industrial production index dropped slightly to 101.9 in November (102.3 in October). December’s purchasing managers’ index (PMI) for manufacturing fell to 48.5 from 49.7 in the previous month, while the services PMI increased to 58.5 (56.1 in November). Across the Atlantic, the eurozone’s industrial production index was stable month on month but decreased by 1.2% year on year in October. The composite PMI stood at 49.5 in December versus 48.3 in November; the services PMI rose to 51.4 in December (November: 49.5), while the manufacturing PMI was steady at 45.2. UK PMI data for December highlights ongoing sectoral challenges. The manufacturing PMI dropped to 48.7, signaling contraction as firms faced weakening demand and lingering supply chain disruptions. Conversely, the services PMI remained above the 50.0 threshold at 50.8, pointing to modest growth, although at a slower pace than previous months.

In November, India’s industrial production grew by 3.5%, driven by primary and construction goods. The manufacturing PMI remained at a healthy 56.5. Brazil’s manufacturing industry also remained in expansion mode midway through the final quarter, as resilient domestic demand encouraged firms to scale up production volumes. Despite falling from 52.9 in October to 52.3 in November, the manufacturing PMI remained above the neutral mark of 50.0 for an 11th month. Underlying data showed that the rise in total sales was domestically driven, as new export orders slipped into contraction. Meanwhile, the services PMI fell to 53.6 in November (from 56.2 in October). Mexico’s purchasing managers’ index (PMI) for manufacturing rose from 48.4 in October to 49.9 in November.

Unemployment rates remained stable across most surveyed economies in November, although India saw a 0.7 percentage point decrease. In the US, the unemployment rate was little changed at 4.2% in November (3.5% in January 2020). Similarly, UK unemployment was steady at 4.2%, but job vacancies continued to decline, marking the 28th consecutive monthly drop. Total unemployment in Mexico dropped by 0.23 percentage points in October, reaching 2.48%.

The mixed performance among equity markets has continued into December. The cost of capital for the government in Brazil has skyrocketed, driven by concerns about inflation, the fiscal situation, and monetary policy tightening.

Total port trade remains below the one-year-ago level but experienced a recovery in November 2024. Chinese ports saw a decline in port trade, reflected in its container throughput index; European throughput rose sharply. Supply chain pressures have eased below the long-term average and have remained there for two consecutive months. In the US, October exports reached $265.7 billion, $4.3 billion less than September exports; October’s imports were $339.6 billion, $14.3 billion less than in September. The monthly deficit decreased by 11.9% to $73.8 billion in October.

* * *

As 2024 draws to a close, multiple geopolitical topics are hitting the headlines: a new regime is in power in Syria, and conflict in the Middle East and Ukraine continues. There is political upheaval in France and Germany, while the world’s attention is turning to US tariff policies in anticipation of Donald Trump’s inauguration in January. Against this uncertain backdrop, it makes sense to revisit a major GEI report from the beginning of the year: Geopolitics and the geometry of global trade.

The report explores how global trade patterns are reconfiguring, why more shifts are likely, and how businesses need to be aware of the potential trade-offs among the different paths ahead.

It highlights how trade among geopolitically distant economies accounts for almost 40% of the trade in certain “concentrated” products such as laptops and iron ore, for which three or fewer economies provide at least 90 percent of global exports. Moreover, as economies shift their trade to more geopolitically aligned partners, average trade concentration increases by 13 percent and economic growth suffers as a consequence. In a contrasting scenario, as trade relationships diversify (such that no economy is highly dependent on another), the geopolitical distance of trade increases by 3 percent.

The report’s authors argue that business leaders need to position their organizations for uncertainty, by cultivating an insights edge, anticipating and adapting with scenario planning, developing a portfolio of strategic actions, and building geopolitical muscle. At the same time, businesses can contribute to, and help shape, discourse around global connections.

Regional and Country Summary

In the advanced economies, US and eurozone cut interest rates as UK holds; France, Germany, and US anticipate government changes in 2025.

United States

FOMC cuts rates by 25 basis points; trade deficit falls 11.9%; existing home sales increased by 4.8%, hitting eight-month high; equity markets reached record highs.

At December’s meeting considering the balance of risks towards its long-term goal, the Federal Open Market Committee (FOMC) decided to lower the target range for the federal funds rate by 0.25 percentage points to 4.25–4.50%.

October exports were $265.7 billion, $4.3 billion less than September exports; October’s imports were $339.6 billion, $14.3 billion less than in September. The monthly deficit decreased by 11.9% to $73.8 billion in October.

The consumer price index (CPI) rose 2.7% for the 12 months ending November, after rising 2.6% over the 12 months ending October. Core inflation slightly increased to 3.3% (annualized) in November. Consumers’ one-year-ahead inflation expectations at the one-year horizon rose slightly to 3% (2.9% in October) and, at the five-year horizon, ticked up to 2.9% from 2.8%, according to the November Survey of Consumer Expectations.

Retail and food services sales for November (adjusted for seasonal variation and holiday and trading-day differences) were $724.6 billion—a 0.7% increase from October. The consumer confidence index (Conference Board) increased in November to 111.7, up from 109.6 in October.

The unemployment rate changed little at 4.2% in November (3.5% in January 2020). Total nonfarm payroll employment rose by 227,000 in November.

The industrial production index dropped slightly to 101.9 in November (102.3 in October).
December’s purchasing managers’ index (PMI) for manufacturing fell to 48.5 from 49.7 in the previous month, while the services PMI increased to 58.5 (56.1 in November).

In November, the S&P 500 was up 5.7%, bringing the one-year return to 32.0%; the Dow Jones gained by 7.5% for the month, registering 24.9% in terms of its one-year growth. During November, the CBOE Volatility Index averaged 13.5 (21.8 in October).

On the housing market, the 30-year fixed-rate mortgage had decreased slightly to 6.6% by December 12 (6.8% in November). Existing home sales increased by 4.8% in November. During November, housing residential starts decreased to 1,289,000 (down from a revised figure of 1,312,000 in October). Completions are down to 1,601,000 this month (from 1,632,000 in October).

On January 20, President-elect Donald Trump and Vice president elect JD Vance will be sworn into office. Trump and his cabinet have an ambitious agenda for his first 100 days in office, putting emphasis on immigration and border control matters.

Reports are emerging that Nissan and Honda are exploring a blockbuster merger, as the two rival companies seek to stay competitive on the road to full electrification. Such a merger would create a $54 billion company with 7.4 million vehicles sales annually (at today’s levels), ranking it third globally by sales after Toyota and Volkswagen.

Eurozone

Eurozone projections revised down; headline inflation up to 2.2%; Germany faces snap elections next year.

Q3 GDP growth was 0.2% quarter on quarter, and 1.0% year over year. Real GDP growth is expected to be 0.7% in 2024 and 1.1% in 2025, according to the ECB’s December projections. The latest projections revise the GDP growth outlook by –0.1 percentage points in 2024 and –0.2 percentage points in 2025. Following a period of extended stagnation, the EU economy started to expand in the first quarter of this year. This growth persisted at a steady yet moderate rate throughout the second and third quarters, accompanied by a reduction in inflationary pressures. Despite lingering uncertainties, the outlook appears positive for a modest rise in domestic demand.

The euro area surplus was down to €6.8 billion in October 2024 from €12.5 billion in September. Goods exports in October 2024 reached €254.0 billion, compared with €237.8 billion in September. Imports were €247.2 billion, down by 0.6% month on month. This decrease was mainly due to a reduction in the surplus for chemicals and related products (from +€21.7 billion to +€19.2 billion) and machineries and vehicles (from +€13.4 billion to +€11.9 billion), together with an increase in the deficit for energy (from –€22.1 billion to –€25.5 billion).

Even though headline inflation edged up, the ECB cut key interest rates by 25 basis points on December 18, bringing the main refinancing operations rate to 3.15%. President Christine Lagarde said that, with inflation aligned to expectations, it was appropriate to further moderate the degree of monetary policy restriction.

In November, headline inflation was up to 2.2%, mainly due to an uptick in energy prices (0.5% month on month), while core inflation stood at 2.8%. Services inflation was 3.9%, which continues to point to strong domestic price pressures, with wages growth still elevated (4.6% in 2024 Q3). Producer prices have been in positive territory since December but recorded –0.3% month on month and –0.1% year on year in November 2024. ECB projections show inflation is expected to be 2.4% in 2024 (–0.1 pp), 2.1% in 2025 (–0.1 pp), and 1.9% in 2026 (unchanged). For core inflation, ECB staff projections are: 2.9% in 2024 (unchanged), 2.3% in 2025 (unchanged), and 1.9% in 2026 (–0.1 pp).

The forward-looking indicator, Eurocoin ticked up to 0.23 in November from 0.18 in October. The industrial production index was stable month on month but decreased by 1.2% year on year in October. The composite purchasing managers’ index PMI stood at 49.5 in December versus 48.3 in November; the services PMI rose to 51.4 in December (November: 49.5), while the manufacturing PMI was steady at 45.2.

France’s President Emmanuel Macron welcomed dignitaries to the newly refurbished medieval cathedral of Notre Dame on December 7, following five years of restoration work after a devastating fire in April 2019.

United Kingdom

Inflation accelerated to 2.6%, influencing the Bank of England’s interest rate decision; consumers continue to struggle, while businesses show mixed performance—with contracting manufacturing, slowing services, and accelerating construction; financial markets remain volatile.

Overall, the UK economy faces headwinds, with some commentators attributing its recent mixed performance partly to businesses’ reaction to government policies announced in October’s budget. These included some £40 billion in tax rises, with an increase in National Insurance contributions among the most significant. The hike in employers’ NI contributions has drawn criticism from small businesses and the charity sector, as well as larger employers, and contributed to a slowdown in hiring.

On December 19, the Bank of England announced it had downgraded its growth forecast for the final quarter of 2024, from 0.3% to 0% (compared with its forecast of just six weeks before). Meanwhile, the latest Confederation of British Industry (CBI) Growth Indicator, released December 23, suggests that growth expectations are now at their weakest in over two years. Private sector firms expect activity next year to fall in the three months to March (weighted balance of –24%), the CBI states.

The Bank of England maintained its policy rate at 4.75% in December, prioritizing inflation control over growth concerns. The Monetary Policy Committee’s decision was not unanimous, with three members voting for a rate cut. Following the decision, gilt yields surged, with 10-year yields peaking at 4.5%, reflecting investor expectations for prolonged higher rates.

That said, inflation increased for the second consecutive month, reaching 2.6%. The current trajectory is concerning, particularly as it is being driven primarily by consumer goods. With the acceleration of wages and salaries, this could lead to uncontrolled consumer inflation.

However, consumers remain cautious with their spending. As the latest consumer confidence index shows, a majority of the population is worried about future economic performance. This sentiment directly impacts consumption, which, despite a slight increase in October, has remained stagnant since 2022.

Unemployment was steady at 4.2%, but job vacancies continued to decline, marking the 28th consecutive monthly drop. Wage growth remained robust, driven by a tight labor market and skill mismatches, exacerbating inflation challenges.

In financial markets, the FTSE 100 fell by 3% during the week ending December 20, marking its worst weekly performance since August 2023. The bond market also experienced volatility, with rising yields highlighting market unease.

PMI data for December highlighted ongoing sectoral challenges. The manufacturing PMI dropped to 48.7, signaling contraction as firms faced weakening demand and lingering supply chain disruptions. Conversely, the services PMI remained above the 50.0 threshold at 50.8, pointing to modest growth, although at a slower pace than previous months. The construction PMI showed resilience, registering 55.2, supported by infrastructure projects.

Meanwhile, government borrowing fell in November, according to the Office for National Statistics. Borrowing, which reflects the difference between spending and tax receipts, was £11.2 billion last month, the lowest November figure since 2021.

In emerging economies, China’s economy continues to stabilize, with India’s economy showing continuing resilience and growth; Brazil hikes Selic rate by full percentage point.

China

China’s economy continued to stabilize in November. Housing demand maintained its recovery momentum, while industrial production, the labor market, and prices remained largely stable. However, exports and investment grew at a slower pace.

Industrial output growth stabilized in November, registering a 5.4% increase compared to 5.3% in October. The manufacturing sector saw the industrial production growth rate rise to 6.0%, up from 5.4% in October. However, industrial production growth in the mining and utility sectors decelerated to 4.2% and 1.6%, respectively, down from 4.6% and 5.4% in October.

Growth in fixed-asset investment slowed to 2.4% in November, down from 3.4% in October. Manufacturing investment growth remained robust, reaching 9.3% year on year in November, compared to 10.0% in October. Utility investment decelerated to 3.3% year on year in November, down from 5.8% in October. However, real estate investment continued to be sluggish, declining −14.2% in November.

In November, the slowdown in the real estate market continued to show signs of easing. Demand-side indicators revealed a rebound, with sales revenue for new residential properties growing by 3.4%, up from 0.8% in October. Additionally, the floor space sold for new houses in 30 major cities increased by 21% in November. However, on the supply side, floor space started decreased −27.3% in November, compared to a decline of −25.7% in October.

New social financing increased to RMB 2.3 trillion in November, up from RMB 1.4 trillion in October. However, on a year-on-year basis, it declined −5.3% in November. This contraction in new social financing can be attributed to a decrease in new bank loan financing.

The overall surveyed urban unemployment rate held steady at 5.0% in November. The youth unemployment rate decreased to 16.1% in November, slightly down from 17.1% in October.

Cross-border trade experienced a deceleration in November, growing by 2.1%, down from 6.0% in October. This deceleration was primarily driven by a slowdown in export growth, which fell to 6.7% from 12.7% in the previous month. Imports continued to contract, decreasing −3.9% in November compared with −2.3% in October.

Inflation remained low, with the consumer price index (CPI) registering a modest 0.2% in November, a slight dip from October’s 0.3%. Meanwhile, the producer price index (PPI) showed a decline of −2.5% in November, compared to −2.9% in the previous month.

China held the Central Economic Work Conference in mid-December. During the conference, the government identified insufficient domestic demand as the primary challenge and outlined the economic priorities for 2025. These priorities include boosting domestic demand, stabilizing the real estate sector, and advancing innovation to drive sustainable growth.

India

India’s economy continues to exhibit resilience and growth, with robust performance in key sectors despite global economic headwinds; GDP growth rate for FY 2024–25 projected at 6.5%, supported by strong domestic consumption and increased private investments; inflationary pressures have moderated, though challenges remain in external trade and rural demand recovery.

The Reserve Bank of India (RBI) opted to hold the repo rate at 6.5% at its December policy meeting, prioritizing inflation control without stifling economic growth. This cautious approach reflects a commitment to stability while ensuring adequate liquidity to bolster micro, small, and medium-sized enterprises (MSMEs) and rural operations. The decision aligns with a moderation in headline inflation, which eased to 5.5% in November due to declining fuel prices and slower growth in food prices.

However, the central bank did cut the cash reserve ratio for banks by 50 basis points. This move aims to release additional liquidity into the economy, supporting credit for small and medium-sized companies.

In November, industrial production grew by 3.5%, driven by primary and construction goods. The purchasing managers’ index (PMI) for manufacturing remained at a healthy 56.5. While growth has slowed, it remains strong, with new orders and employment serving as key drivers. However, rising input costs are starting to curb production. Managers reported the highest input cost inflation in almost 11 years. Similarly, in the services sector, inflation reached a 12-year high, although new orders and employment continue to underpin growth.

Consumers, on the other hand, remain relatively cautious. Consumer confidence is still below the 100 threshold, indicating households are more inclined to save than spend. However, future economic expectations suggest long-term optimism about growth.

Labor markets were broadly unchanged in November, with the unemployment rate oscillating around 8% without significant changes. However, the overall number of employed people declined, driven by seasonal demand factors. This is expected to rebound in the coming months.

Trade dynamics reflected global economic uncertainties, with exports contracting by 5.3% year on year in November. At the same time, imports increased by approximately 26%, driven by domestic demand. This led to a deterioration in the goods trade balance, which recorded a $36 billion deficit.

Financial markets ended 2024 on a low note. After two months of declines, December saw a brief rebound but ultimately closed the month at similar levels to where it began. The automotive and power sectors were the primary drivers of the decline.

Brazil

Inflation continues upward trend; COPOM raises Selic rate by a full percentage point; composite PMI fell; unemployment rate declined slightly.

Inflation climbed to 4.87% in November (4.76% in October), increasing for a third consecutive month and breaching the central bank’s target upper limit (4.50%) for the second time. COPOM hiked the Selic rate from 11.25 to 12.25% during its latest meeting on December 10.

Consumer confidence remains below the neutral 100 mark but ticked up to 95.6 in November (93.0 in October), continuing its upward trend after decreasing for one month. Business confidence fell slightly to 97.4 in November (97.9 in October), reaching its lowest level since June.

Brazil’s manufacturing industry remained in expansion mode midway through the final quarter, as resilient domestic demand encouraged firms to scale up production volumes. Despite falling from 52.9 in October to 52.3 in November, the purchasing managers’ index (PMI) for manufacturing remained above the neutral mark of 50.0 for an 11th month, signaling another improvement in the health of the sector. The rate of expansion was the slowest in three months but remained above its long-run average. Underlying data showed that the rise in total sales was domestically driven, as new export orders slipped into contraction.

Although Brazil’s service economy sustained strong growth during November, a slower improvement in demand conditions somewhat constrained expansions in new business and output. The services PMI fell to 53.6 in November (from 56.2 in October). New orders placed with Brazilian service providers rose strongly. However, the pace of growth retreated to its slowest since August. Granular data showed weakness in the finance and insurance subsector. This segment was the only one to see a fall in sales and an absence of activity growth. The composite PMI was down slightly from 55.9 to 53.5 in November, staying within the expansion zone for a 14th consecutive month.

On the financial markets, the monthly average exchange rate was BRL 5.80 per US dollar in November (5.63 in October). The Banco Central do Brasil has been taking significant measures to protect the value of the real in December, amid fears of an overheating economy and a scenario known as fiscal dominance—when fiscal expansion undercuts the impact of the central bank’s attempts to tighten policy. Brazil’s currency has slid some 20% this year, prompting the bank to raise interest rates aggressively and spend dollar reserves. November saw the Bovespa equities index drop, losing 3.1% in value.

The balance of trade registered a November surplus of $7.0 billion, versus $4.2 billion in October, driven by a decrease in imports ($21.0 billion in November compared to $25.1 billion in October) and exports ($28.0 billion in November versus $29.3 billion in October).
Meanwhile, the three-month moving average unemployment rate dropped to 6.2% in October (6.4% in September), down for the seventh time this year, and lower than the same period last year (7.6%).

Russia

Economic activity losing momentum in Q3; export earnings remain stable, supporting current account; stubbornly high inflation persists in tight labor market, despite monetary stringency; currency depreciating.

Preliminary estimates put Russian GDP growth at 3.3% year on year in Q3, a slowdown from 3.9% in Q2. This has been broad-based, as all core sectors have shown weaker growth than in the first half of this year. Sequential growth has slightly accelerated to 0.7% quarter on quarter, from 0.5% previously. This year, the economy is likely to grow 3.6%, but slowing momentum has prompted a downward revision of the 2025 GDP growth forecast. Overall, 2025 GDP growth is forecasted at between 1.0 and 1.6% as tight monetary policy and expected fiscal consolidation are negatively affecting domestic demand. Net exports may become the key growth engine in 2025, following rises in Russia’s oil output quota within the OPEC+ deal.

Early Q4 data have been moderately optimistic. Annual growth in the total output indicator picked up to 3.3% in October from a Q3 average of 2.9%, with pronounced divergence between its components. Retail sales growth has remained healthy at 5% (although lower than the Q3 average of 6.1%), bolstered by subsidized purchases of locally made cars. In contrast, mining remains weak, with various factors including Western sanctions, OPEC+ oil output restrictions, and lower Chinese demand in place. According to the IEA, Russia exported 7.3 million barrels of oil per day in October, the same as the Q3 average.

Russia’s export earnings have remained stable this year. According to the central bank’s preliminary estimate, the value of goods exports in January–November amounted to $386 billion, about the same level as in 2023. This reflects a 10% increase in the oil export price, offset by a decline in its production and export volumes. Despite goods imports rising slightly in recent months, year-to-date value was just $275 billion, a 3% decrease from a year earlier. The contraction reflects slowing demand growth, depreciation of the ruble, as well as complications caused by sanctions. With shrinking imports, Russia’s current account surplus has grown to $59 billion from $49 billion in the same period last year.

Consumer price inflation remained elevated at around 9% year on year in November. In response, the central bank aggressively raised its key rate in recent months to an all-time high of 21% at its October meeting. Although the CBR board had signaled that the rate could go even higher in December, with analysts expecting another hike by 200 basis points to 23% at the meeting on December 20, the bank in fact held rates. Interest rates at such a high level, alongside related borrowing costs, are contributing to slower production growth and depressing capital investment by firms.

The recent weakness of the currency presents a new inflationary risk. Despite higher oil prices and a growing current account surplus, the ruble’s exchange rate has weakened this year. In November, its value fell below 110 per 1$; in December it trades above 100 per 1$.

Mexico

Inflation declined to 4.6% in November, while the Bank of Mexico lowered the benchmark interest rate by 50 basis points over the two months to December.

In November, the inflation rate dropped to 4.6% (from 4.8% in October), its lowest in eight months, but remaining outside the Central Bank’s target range of 2–4%. November’s closing consumer price index (CPI) was up 0.4% from October, due to an increase in energy prices, food and beverages costs, and housing and utilities.

Consumer confidence remained stable in September at 106.2, above the neutral 100-point mark and the highest among OECD countries. In November, Mexico’s purchasing managers’ index (PMI) for manufacturing rose from 48.4 in October to 49.9—an upward movement reflecting softer declines in new work intakes and output, but also a substantially sharper lengthening of supplier delivery times.

Total unemployment dropped by 0.23 percentage points in October, reaching 2.48%. During the same period, formal employment grew by approximately 138,000 workers, with the largest increases reported in the transport, communications, agriculture, and trade sectors.

On the markets, the monthly average exchange rate in November was MXN 20.4 per USD (up from MXN 19.7 in September), the highest this year.

In October, Mexico experienced notable growth in both imports and exports, contributing to a trade surplus of $370.8 million. Exports totaled US $57.6 billion (up from US $49.6 billion in September), against imports of US $57.3 billion (up from US $50.2 billion in September). Nearshoring trends, which shifted manufacturing closer to the US, boosted exports, especially in automotive and electronics. Strengthened trade relations with the US and efforts to enhance domestic manufacturing reduced reliance on Chinese imports and stimulated trade. Additionally, concerns over potential US trade policy changes prompted preemptive stockpiling by Mexican importers, further driving import growth.

In November and December, the Bank of Mexico continued its monetary easing cycle with two consecutive 25 basis point reductions in the benchmark interest rate. On November 14, the central bank lowered the rate from 10.50% to 10.25%, followed by another cut on December 19, bringing the rate to 10.00%. The December adjustment was influenced by a continuing decrease in inflation. Banxico stated that the ongoing disinflationary trend might allow for more substantial rate cuts in future, though it maintained a cautious approach to ensure price stability.

Moody’s has downgraded Mexico’s government debt outlook from “stable” to “negative”, citing concerns over a weakening judicial system due to newly approved laws and increased government debt. The agency reaffirmed the Baa2 credit rating but warned of risks from transferring more funds to the heavily indebted state-owned oil company, Pemex.

McKinsey’s Global Economics Intelligence (GEI) provides macroeconomic data and analysis of the world economy. Each monthly release includes an executive summary on global critical trends and risks, as well as focused insights on the latest national and regional developments. Detailed visualized data for the global economy, with focused reports on selected individual economies, are also provided as PDF downloads on McKinsey.com. The reports available free to email subscribers and through the McKinsey Insights App. To add a name to our subscriber list, click here. GEI is a joint project of McKinsey’s Strategy and Corporate Finance Practice and the McKinsey Global Institute.

The data and analysis in McKinsey’s Global Economics Intelligence are developed by Jeffrey Condon, a senior expert in McKinsey’s Atlanta office; Krzysztof Kwiatkowski is an expert in the Greater Boston office; and Sven Smit, a senior partner in the Amsterdam office.

The authors wish to thank Nick de Cent, as well as José Álvares, Cristina Barrantes, Darien Ghersinich, Yifei Liu, Marianthi Marouli, Tomasz Mataczynski, Frances Matamoros, Jose Maria Quiros, Erik Rong, Valeria Valverde, and Sebastian Vargas for their contributions to this article.

The invasion of Ukraine continues to have deep human, as well as social and economic, impact across countries and sectors. The implications of the invasion are rapidly evolving and are inherently uncertain. As a result, this document, and the data and analysis it sets out, should be treated as a best-efforts perspective at a specific point of time, which seeks to help inform discussion and decisions taken by leaders of relevant organizations. The document does not set out economic or geopolitical forecasts and should not be treated as doing so. It also does not provide legal analysis, including but not limited to legal advice on sanctions or export control issues.