JP Morgan Projects Lower Growth Outlook For 2025, 15 Per Cent Chance Of Recession Amid AI Technological Advancements

JP Morgan has outlined an optimistic yet nuanced economic outlook for 2025, predicting only a 15 per cent likelihood of a global recession in the first half of the year. While acknowledging potential uncertainties, the firm sees strong prospects for growth led by technological advancements and strategic investments in key sectors.

The United States (US) is expected to remain a primary growth driver, bolstered by a robust labor market, sound credit fundamentals, and significant investments in artificial intelligence (AI).

“Technological advancements in AI will play a pivotal role in shaping markets, with monetisation likely to gain momentum in the coming quarters,” JP Morgan stated. However, potential policy changes under the new US administration in trade, fiscal, and energy sectors could introduce uncertainties.

Global growth is forecasted to decelerate to 2.2 per cent in 2025 from 2.7 per cent in 2024, with notable regional variations. US growth is projected to decline from 2.4 per cent to 2.0 per cent, while China's growth may drop from 4.8 per cent to 3.2 per cent.

Inflation is expected to ease globally, with the consumer price index (CPI) falling from 3.0 per cent to 2.7 per cent, although disinflation processes will likely differ across countries due to unique supply-demand dynamics.

The European Central Bank (ECB) is likely to reduce rates below the neutral level of 1.75 per cent, while emerging markets may experience slower rate normalization due to currency challenges.

JP Morgan advocates a flexible investment strategy to navigate the evolving macroeconomic landscape. It recommends overweight equity positions in India, the UAE, and Japan’s banking sector, along with US industries like cybersecurity and data centers.

In bonds, opportunities are highlighted in Euro area duration, Turkish government bonds, and Indian rupee duration. For commodities, long positions in gold and short positions in oil are advised, reflecting resilience in gold and weak fundamentals in oil.

The firm also sees promise in currencies and credit markets, favoring the Turkish Lira and Israeli Shekel, and highlighting strong fundamentals in corporate credit.

“Adaptability and a focus on idiosyncratic factors will be key to successfully navigating the complex and dynamic macroeconomic environment in 2025,” JP Morgan emphasised.