Reserve Bank of India or RBI stated in a latest monthly update that the economic outlook for 2025 is divergent across countries with some loss of speed in the US; weak to modest recoveries in Europe and Japan; more moderate growth profiles in emerging and developing countries alongside a more gradual disinflation relative to advanced economies. Global disinflation can be expected to continue unevenly, opening up some more albeit limited space for monetary policy easing. This would bring welcome relief for households and individuals whose finances and spending power has been severely stretched as they reel under credit card defaults, and also for lenders who are facing the highest levels of write-offs in 14 years. Together with technological advancements, these developments could lift incomes and boost aggregate demand.

The battle against inflation is, however, entering a new phase with fresh upside threats on the horizon - the weaponisation of uncertainty - and the future path of interest rates is becoming hazy. On the other hand, lack of fiscal space and the enormous debt overhang could clearly keep borrowing costs high as developments in the first half of January 2025 revealed. This could dent investment in new capacities even as supply conditions remain hostage to geopolitical disruptions that seem to be unending. Global trade is expected to improve, with volume expansion somewhat higher in 2025 than in the year gone by, although the persistence of geopolitical risks and the looming threats of a more protectionist environment overcast these expectations with high uncertainty. Global corporate debt sales have soared to a record US $8 trillion on demand from investors to take advantage of the compression in spreads.

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