Article | January 2025
Allianz Risk Barometer 2025 -
Global risk #7: Macroeconomic developments (15%)
Last year, many elections generated attention. In 2025, new governments set the course for the future and the long-term consequences for growth and prosperity will be significant.
This article is part of the Allianz Risk Barometer 2025
In 2025 there is nothing new on the cards in terms of global growth. Two years ago, the global economy grew by 2.8%. 2024: 2.8%. And the forecast for 2025? 2.8%, according to Allianz Research. The headwind from geopolitical risks and rising interest rates has not yet been able to slow growth. It is therefore no wonder that many companies see macroeconomic developments as a lower business risk in the Allianz Risk Barometer this year, falling to #7. The world economy seems to be on a stable course. However, this only applies to the surface of the global growth rate – below, there has been some turbulence.
Take China, for example: structural problems in the immensely important real estate market have proven to be a stubborn drag on sentiment and growth over the last two years. Or in Germany: creeping deindustrialization plunged the economy into recession for two consecutive years. By contrast, the US: the predicted recession never materialized, and the economy continued to grow despite sharp interest rate hikes, mainly because US consumers simply refused to curb their spending.
This is not likely to change much in 2025 either, as central bank policy will shift from taming inflation to supporting growth. In particular, the US economy will remain relatively robust (+2.3%), as the new US government's measures are likely to be growth-neutral: tax cuts and deregulation on the one hand, tariffs and deportations on the other. Of course, it remains to be seen how much of what has been announced can actually be implemented. The Eurozone (+1.2%) and China (+4.6%), on the other hand, are likely to remain still below their potential, not least due to the threat of trade wars. However, India and members of ASEAN could benefit from new trade routes and partnerships. Emerging markets (+4.1%) should therefore remain the growth engine of the global economy.
Overview
Macroeconomic developments (e.g., inflation, deflation, monetary policies, austerity programs)
Ranking history:
- 2024: rank 5
- 2023: rank 3
- 2022: rank: 10
- 2021: rank 8
- 2020: rank 10
Top risk in:
- Burundi
- Ghana
Profound transformation
But as in previous years, the bare growth rates only tell half the story. They suggest business as normal, when most economies are undergoing a profound transformation, according to Ludovic Subran, Chief Investment Officer and Chief Economist at Allianz: “The US, for example, is attempting an autocentric re-industrialization. China, too, is looking more inward, trying to transition towards a more consumption-driven economy. And Europe is in the process of creating a green industry as the basis for global competitiveness and technology leadership. Thus, the approaches differ significantly. The times when economic models converged under the pressure of globalization are over. The fragmentation of the world economy is evident not only in the erection of new trade barriers and sanctions, but also in the different concepts for securing prosperity.
“In 2024, the many elections generated a great deal of attention. 2025 will be the year in which the new governments set the course for the future. This will in most cases not have an immediate impact, but the long-term consequences for growth and prosperity will be significant. For companies, it is therefore worth following developments closely and identifying risks and opportunities in good time.”
Insolvency outlook
Global business insolvencies are set to stabilize, but at a record high level.
After +1% increase in 2022, +7% in 2023 and +9% in 2024, will global business insolvencies start to decrease in 2025? Not yet, according to Allianz Trade. Although they should record a stable level after three consecutive rises, a prolonged high level is planned, particularly in advanced economies.
“We expect the upward curve to come to a halt, with business insolvencies stabilizing at a high level globally in 2025. This stabilization, however, would result from more uneven regional and national trends than in 2024: 3 out of 10 countries should see business insolvencies increase in 2025, including a mix of large and smaller economies accounting for more than half of global GDP. Next year, the downward trend reversal should gain traction in few countries, but global insolvencies would still post a high level,” explains Maxime Lemerle, Lead Analyst for Insolvency Research at Allianz Trade.
In the US, Allianz Trade expects insolvencies to rise by +4% in 2025 before accelerating by +6% in 2026. In Germany, they will increase by +5% before falling by -4% in 2026. In France, they will slightly moderate from very high levels (-3% in 2025 and -7% in 2026) while in Italy they will continue to rise (+6% and +1% respectively). The UK should confirm the trend reversal started end of 2024 (-5% both in 2025 and 2026). In China, business insolvencies will start to increase from low levels (+3% and +6% in 2025 and 2026 respectively).
Household-oriented sectors on the watch list
When it comes to sectors, construction and real estate have recorded noticeable jumps in business insolvencies in 2024, as evidenced by the latest available figures, especially in Sweden, the Netherlands, France, Germany, and Italy in Europe, as well as Japan in Asia, and, importantly, Canada and the US.
“The first signs of recovery in activity for 2025, mostly driven by decreasing interest rates in major economies, should support an improvement, but the unwinding of major headwinds will remain gradual and structural challenges are likely to persist, leading the sector to continue boosting national numbers of business insolvencies, also because of the relatively higher number of firms and share of SMEs,” adds Lemerle.
Percentage increase of insolvencies in 2025
Source: Allianz Trade
Major insolvencies: beware of domino effects
Large firms have not been immune to rising business insolvencies, still recording more than one bankruptcy a day. Globally, major insolvencies* hit a new high number of cases in Q3 2024 (127 cases), surpassing the pre-pandemic average level.
“Major insolvencies increased by +26% year-on-year for the first three quarters of 2024 (344 cases). Western Europe is leading the global count with 127 cases over the first half of 2024 (+51 y/y), ahead of Asia-Pacific and North America. The US remains at the forefront when it comes to the largest insolvencies, accounting for nine out of the 20 largest insolvencies worldwide over the first three quarters of 2024. This raises the risks of a domino effect of insolvencies through companies’ long lists of suppliers”, concludes Lemerle.
References
* Firms with an annual turnover exceeding €50m
Picture: Shutterstock
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