A Baseline Scenario for Global Economy in 2025

Economic fragmentation will continue, pushing some countries to diversify their reserves further away from the US dollar and explore alternative payment systems

- MOHAMED A EL-ERIAN

IT IS SOMETHING of a tradition every December to take stock of the year that is ending and consider what might lie ahead. This is true on a personal level: in my family, we tend to do this around the dinner table. But it is also true more broadly, with the time of year inviting an examination of the intersection of economics, national politics, and global geopolitics.

You would be forgiven if, as a starting point, you expected these three areas to be in alignment. After all, they are deeply interconnected, which suggests self-reinforcing dynamics. But 2024 brought some unusual dispersion in this relationship that actually widened, rather than narrowed, over the course of the year.

Begin with geopolitics. In 2024, Russia secured a greater advantage in the Ukraine war than the consensus forecasts of a year ago anticipated. Similarly, the human suffering and physical destruction resulting from the Israel-Hamas war in Gaza exceeded most observers' already-grim expectations, and spread to other countries, such as Lebanon. The apparent impunity of the strong, together with the absence of effective means of preventing dire humanitarian crises, has deepened the sense for many that the global order is fundamentally imbalanced, and lacks any enforceable guardrails.