After an action-packed year of elections, economic developments, and sporting events, it has been interesting to look back on where our thinking was a year ago. What did we get right? What did we get wrong? Most importantly, where can we improve?

Beginning with politics, we were hardly alone in our call of a Labour victory in the UK general election. We successfully identified a coalition involving the European People’s Party as the most likely outcome of the European Parliament election. Our prediction that the Identity and Democracy Party would win more than a tenth of the seats fell short, however. In Asia, we pointed to a Democratic Progressive Party victory in Taiwan. Our suggestion that this would prompt action from China, albeit falling short of a military invasion, was also largely true.

On the economy, we were right to predict sluggish global activity, with 2024 looking like the worst year for growth since the Covid-19 pandemic. We were accurate in our monetary policy predictions, predicting that rates would fall gradually in response to decelerating inflation on both sides of the Atlantic. We also said that interest rate dynamics would support property and financial markets, which both showed decent gains in 2024. Our suggestion that the re-election of President Trump could trigger a federal default was wide of the mark, though US public finances clearly remain a risk to the global economy.

This time a year ago we predicted improved, but still slow, UK growth. This has indeed happened, though it’s important to highlight that we got the distribution wrong. We had predicted a slow start to the year following 2023’s recession, before an upturn in fortunes. In reality, the reverse happened, with a strong first half of the year followed by a near-stagnant second.

Our infamous sporting predictions were once again a mixed bag. Our call of England as favourites for the European Championship was a close one, with the Three Lions finishing runners-up to a deservedly triumphant Spain. In cricket, India was successfully selected to win the T20 World Cup, though our tip for Australia to be beaten finalists was way off. We expected a deal to emerge between the PGA and its Saudi-backed rival in the golf. Though not yet finalised, this does appear to be progressing.

For our 2025 predictions we begin with a look across the world, then focus in on the UK, before briefly discussing price dynamics and the crypto landscape. We conclude with another round of sporting predictions…

First, the Russia-Ukraine war looks set to inch closer to an end, in big part due to Donald Trump’s return to the White House. The president-elect insists that he will be able to broker a peace deal, strongly suggesting that the US’s willingness to continue supporting the Ukrainian side is waning. For Russia, the conflict has come at a huge economic cost and they too might be more incentivised in 2025 to seek a resolution.

Second, in the Middle East the landscape will remain precarious, with Israel unlikely to wage all-out war on any other regional country, but also unlikely to stop its more limited aggressions. Israel will be emboldened by its recent military successes, but, once again, the change of president in the US will play a role in the regional dynamics. President-elect Trump seems wary of wholeheartedly backing Israel and will most likely be supportive of a fragile, and almost certainly temporary, de-escalation of hostilities.

Third, we’ve already mentioned the extent to which Donald Trump’s re-election may impact global dynamics, so we now consider our expectation for what it will mean for the US. Trump’s spending and tax plans pose fiscal risks in the medium-to-long term. However, in 2025 they will make the US an even more attractive place for investment, which will drive business and capital away from places like Europe and the UK.

This will be amplified by the low rates of economic growth and increasing tax burden across Europe. The Trump administration’s focus on growth and pro-business policies may push European governments in a similar direction, motivating them to reconsider the rise in the regulatory burden and the growth of the state that has prevailed in recent years.

Speaking of Europe, our fourth prediction is that more European governments will find themselves unwillingly following the path of France and Germany, both of which saw their governments collapse this year. A major stumbling block for policymakers across Europe will be how to address significant deficits while maintaining popular support, something which in 2024 proved impossible.

On China, our outlook is for a slowdown in growth. Underlying domestic demand has been weak recently, reflected most clearly in the country’s low inflation rate, which we expect to continue. While intervention from the Chinese ruling party in the form of fiscal stimulus packages will provide some support for growth, the extent to which they succeed will depend on how they address the structural issues facing the economy. Moreover, there will still be constraints from domestic and external uncertainties. Key amongst these are credit aversion, geopolitical tensions, and trade policy risks, including the potential for heightened tariffs from the US. China’s slowdown will also play a role in continually weak global growth in 2025.

Looking at the UK, our prediction is somewhat similar to a year ago: growth will improve in 2025 but remain slow compared to historical averages. This will be supported by looser monetary policy, with the Bank of England expected to implement a number of rate cuts, and expansionary fiscal policy, reflecting Labour’s commitment to increase government investment. Nevertheless, there are notable constraints. The outlook for business investment appears particularly weak, reflecting poor confidence and anticipated responses to policies announced at the new government’s inaugural Budget. 

Our outlook for UK housing is modest. Price growth is expected to accelerate in 2025, driven by improved affordability and subsequently higher demand. Affordability will be supported by earnings growth which, despite expectations of above target inflation for much of the year, will still amount to real terms improvement. House price growth will continue to fall short of its rental equivalent, however.  

Prediction eight looks at price dynamics. Household gas and electricity bills, which reflect the dynamics in commodity markets with a lag, are the main drivers of our expectation of above target UK inflation. After a sustained period of deflation, these prices are set to return to growth in 2025. Meanwhile, water prices will increase sharply to cover the cost of infrastructure improvements. Stronger price rises are also expected to take place in labour-intensive sectors, such as retail and hospitality, capturing the pass through of upcoming policy changes that are likely to increase employment costs.

At the other end of the scale, some products are set to record price falls in 2025. Deflation is expected for motor fuels, with the outlook for oil prices being weak despite recent production cuts by OPEC+. Meanwhile, olive oil prices, which had been subject to one of the sharpest rates of inflation in recent years, will likely fall in 2025 off the back of a strong summer harvest in Spain, the world’s largest producer.

Prediction number nine looks at crypto. 2025 should see a clarification of crypto rules in the US, which has already prompted a number of firms in the space to reevaluate their strategy and shift at least some of their focus towards the world’s largest economy. Clearer crypto rules should also mean that more firms in a wide variety of industries will look to use crypto rails. We are starting to see this in areas such as payments, stablecoins, and tokenisation. AI Agents could find their first mass market application in the use of crypto to perform various financial tasks.

And finally, our sporting predictions. In football, Liverpool currently hold a large margin over their rivals in the Premier League and are also top of the Champions League. We are backing them to win at least one of the two. Our tip to win the Women’s European Championship is current world champions, Spain. Also on football, 2025 will bring a newly formatted Club World Cup. We do not expect there to be as much commercial interest as with other summer tournaments. Our more sleep-deprived colleagues, also known as followers of American sports, have tipped the Buffalo Bills for success. Meanwhile, Lewis Hamilton’s move to Ferrari is not expected to result in victory in the F1 Drivers’ Championship.

Another year over. A new one just begun.

For more information contact:

Nina Skero, Chief Executive – nskero@cebr.com – 020 7324 2876

Sam Miley, Managing Economist and Forecasting Lead – smiley@cebr.com – 020 7324 2874

Cebr is an independent London-based economic consultancy specialising in economic impact assessment, macroeconomic forecasting and thought leadership. For more information on this report, or if you are interested in commissioning research with Cebr, please contact us using our enquiries page.