In the face of global and national political upheavals, the U.S. economy is projected to maintain its exceptional performance, surpassing other major economies in 2025, as per economist Mohamed El Erian.
What Happened: El Erian attributes the strength of the U.S. economy to its significant foreign capital attraction and large-scale investment in future productivity drivers, competitiveness, and growth, according to a Project Syndicate report shared by the economist on X Wednesday.
The former PIMCO CEO said the U.S. economy is “likely to continue outperforming other major economies in 2025."
Despite political turmoil in many countries, including the collapse of governments in France and Germany and the political transition in the U.S. following Donald Trump’s victory, the economy has remained resilient. This resilience is also evident in the face of geopolitical challenges, such as the “axis of convenience” comprising China, Iran, North Korea, and Russia, seeking to challenge the Western-dominated international order.
On the other hand, Europe and China are grappling with significant economic weaknesses, with Europe struggling with low growth and large budget deficits, and China facing the threat of “Japanification.”
Despite these challenges, the U.S. economy has not only remained stable but has also pulled further ahead. This trend is expected to continue in 2025, with the U.S. likely to continue outperforming other major economies.
However, El Erian warns that political and geopolitical upheaval poses a risk to the endurance of U.S. economic exceptionalism.
“My baseline scenario for the [U.S.] includes a somewhat lower immediate growth rate, even as the economy outperforms its peers, and sticky inflation,” wrote El Erian.
Why It Matters: The US economy’s performance in 2025 has been a topic of discussion among experts. JPMorgan’s chief economist, Michael Feroli, previously outlined a divided economic outlook for 2025, influenced by the 2024 elections and the early policy indications from the incoming Trump administration.
The International Monetary Fund (IMF) also revised its forecast for U.S. growth in 2025, projecting a 2.2% growth, which is 0.3 percentage point higher than previous estimates.
Moreover, Goldman Sachs Research predicts a strong year for global economic growth in 2025, with the US expected to lead the way, significantly surpassing the consensus of 1.9%.
However, El Erian’s prediction of the US economy outperforming other major economies aligns with his earlier warning about U.S. Treasury yields potentially hitting 5% in 2025, as markets digest the Federal Reserve's revised rate outlook and end-of-year dynamics.
Photo by International Monetary Fund on Flickr
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This story was generated using Benzinga Neuro and edited by Shivdeep Dhaliwal
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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