According to ING Research, the global economy continues to demonstrate surprising resilience, particularly in Europe, yet uncertainty surrounding the United States remains pronounced. Despite complex forecasting conditions, analysts are cautiously optimistic, noting that a recession is not the base scenario.
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"While the global economy shows remarkable resilience, concerns about the United States are increasing. Estimating U.S. growth prospects is complex. Data is sometimes of poor quality, models fail under major policy changes, and the impact of the trade war is unpredictable. Yet no one is predicting a recession," ING highlights.
At the recent IMF annual meeting in Washington, discussions focused on the contrast between calm financial markets and geopolitical tensions. Europe, once a cause for concern earlier this year, is now performing steadily, albeit at a slow pace.
In the U.S., growth is slightly below early-year expectations, with forecasts around 1.5 to 2 percent for this and next year. Analysts note, however, that "the financial markets have confidence in the future, as evidenced by high equity valuations and low bond risk premiums."
ING identifies three major risks for the U.S. economy: slowing real economic growth, fiscal uncertainties, and escalating tensions with China. The current growth is supported by three main pillars: increased spending by the top 20 percent of income earners, strong employment growth in healthcare, and AI-related investments in software and hardware. "Estimates – although varying – suggest that AI is responsible for nearly half of GDP growth," the report notes.
Potential challenges include negative returns on AI projects, capacity constraints in construction, declining migration, falling house prices, and slower corporate investment outside the tech sector. Additionally, import tariffs may exert increasing pressure over time.
Fiscal concerns persist, with high budget deficits and rising national debt potentially prompting higher interest rates if investor confidence wanes, particularly regarding the Federal Reserve's independence. Meanwhile, U.S.-China trade tensions remain unresolved, with potential restrictions on rare earth exports posing a risk to production. Even a November summit cannot fully guarantee a resolution.
Despite these uncertainties, ING stresses that "forecasts from our bank, other banks, and the IMF look cautiously positive." The focus remains on preparing for multiple scenarios, including less favourable outcomes, as analysts monitor global and American economic developments closely.
More information:
ING
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