CareEdge

Global Economy Update

February 2025
Global Growth Steady; Inflation to Continue Declining

Consumer Price Inflation

Global Real GDP Growth
4.0 3.7 8.0

3.5 3.3 3.3 3.3 7.0

3.2
6.0
3.0
5.0
2.5

%
4.0
2.0 3.0
%

1.5 2.0
1.0
1.0
0.0
0.5 2023 2024 E 2025 P 2026 P

0.0 World
2010-19 2023 2024 E 2025 P 2026 P Advanced Economies
(Historical
Average) Emerging Market and Developing Economies

Source: IMF World Economic Outlook (WEO- January 2025)

Note: P- Projections, E- Estimate

• Global GDP growth forecasted at 3.3% in 2025 (Vs 3.2% in 2024), still lagging behind the historical average of 3.7% recorded from 2010–19.

• Global inflation is projected to ease from 5.7% in 2024 to 4.2% by 2025 and 3.5% by 2026.

• However, trade policy uncertainty and potential tariff effects could disrupt the disinflation process.
2
Divergent Growth Trends

IMF Growth Outlook

Changes in Jan-25
2024 E 2025 P
Projections from
(YoY %) (YoY %)
Oct-24 (pp)
World Output 3.2 3.3 0.1
Advanced Economies 1.7 1.9 0.1
United States 2.8 2.7 0.5
Euro Area 0.8 1.0 –0.2
Japan -0.2 1.1 0.0
United Kingdom 0.9 1.6 0.1
Emerging Market and Developing Economies 4.2 4.2 0.0
China 4.8 4.6 0.1
India 6.5 6.5 0.0
Brazil 3.7 2.2 0.0
Mexico 1.8 1.4 0.1
South Africa 0.8 1.5 0.0
Source: IMF World Economic Outlook (Jan-25) Note: E- Estimate; P- Projections

• Key revisions to 2025 projections: US growth revised up by 0.5 pp, while Euro Area growth revised down by 0.2 pp.

• Growth is expected to rise in the Euro Area, Japan, UK and South Africa in 2025 compared to 2024, while India’s growth is expected to remain stable.

• In contrast, growth in China, Brazil and Mexico is projected to slow in 2025 compared to 2024.
3
Asia Pacific

4
China: 2024 GDP Growth Meets Government Target

Contribution to Real GDP Growth Property Sector Woes Persist

20 50
40
15
30

10 20
10

YoY %
5
%

0
-10
0
-20
-5 -30
-40
-10
-50
Dec-21
Dec-19
Jun-19

Jun-21

Jun-22

Jun-23

Jun-24
Sep-19

Jun-20

Sep-21

Sep-23
Sep-20
Dec-20

Sep-22
Dec-22

Dec-23

Sep-24
Dec-24
Mar-19

Mar-21

Mar-22

Mar-23

Mar-24
Mar-20

2001
2000

2009
2002

2005
2003
2004

2006
2007
2008

2010
2011
2012
2013
2014

2016
2017

2021

2023
2015

2018
2019
2020

2022

2024
Consumption Investment Net Exports Real GDP Growth Floor Space Started Floor Space Sold

Source: CEIC, National Bureau of Statistics Source: CEIC, National Bureau of Statistics

• China’s economic growth in Q4 2024 exceeded market expectations, bringing the full-year real GDP growth to 5%.

• Exports played a key role in supporting the economy, partly driven by front-loading of orders ahead of potential US tariff hikes.

• Amid ongoing property sector slowdown and weak consumption, GDP growth in 2024 was lower than 5.4% growth recorded in 2023.

• Global trade war, with Trump imposing an additional 10% tariff on China and China retaliating with tariffs, is a concerning aspect.
5
India: Centre Balances Consumption Boost Along with Fiscal Consolidation

Capex (% GDP) Fiscal Deficit

20 12
3.5
9.2 10
3.0 16

8
6.7

Rs Trillion
2.5 12 6.4

% of GDP
5.6
4.8 6
%

2.0 4.6 4.4

8
3.2 3.4 4
1.5 3.1 3.1
2.7
2.5 4
1.0 2.1 2
1.6 1.7
0.5 0 0
FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26
(A) (RE) (BE)
0.0
FY19 FY20 FY21 FY22 FY23 FY24 (A) FY25 FY26 Fiscal Deficit (Rs Trillion) Fiscal Deficit (% of GDP, RHS)
(RE) (BE)

Source: Union Budget Documents; CareEdge. Source: Union Budget Documents; CareEdge.
Note: (A): Actuals; (RE): Revised Estimate; (BE): Budget Estimate Note: (A): Actuals; (RE): Revised Estimate; (BE): Budget Estimate

• Union Budget FY26 aims at boosting consumption in the economy via reducing income tax burden.

• Capex focus is expected to continue with budgeted growth of 10.1% (y-o-y) in FY26, taking it to Rs 11.2 trillion.

• Total expenditure is budgeted to decline to 14.2% of GDP in FY26 (Vs 14.6% in FY25); Revex-to-GDP to moderate while capex-to-GDP will be maintained in FY26.

• FY26 fiscal deficit is budgeted at 4.4% of GDP, moderating from 4.8% in FY25.
6
Japan: Interest Payment Burden to Increase with Monetary Policy Normalisation

Government's Interest Payments (Trillion Yen) Tenor Profile of Japanese Government Bonds (JGB)
(%)
16.1

76.5

10.5

7.6

19.0

3.6

Long term (10 years or Medium term (2 to 5 years) Short term (less than 1
2023 2026 (P) 2029 (P) more) year)
Source: MoF, Japan, Reuters Source: MoF, Japan, Sep 24

• BoJ increased short term interest rate by 25 bps in Jan 25 to 0.5%, with no forward guidance on long term interest rates.

• With increasing short term and long term interest rates, the government's interest payment burden is projected to increase by nearly 50% in 3 year period.

• However, large part of the government debt is domestic and long term in nature.

7
Korea: Recent Political Turmoil Does Not Pose Significant Near-Term Credit Risks

General Government Gross Debt

70

60

50
% of GDP

40

30

20

10

0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 P 2025 P 2026 P 2027 P 2028 P 2029 P

Source: IMF World Economic Outlook (Oct-24)

Note: P=Projections

• The Republic of Korea’s brief encounter with martial law and its subsequent revocation reflects political fault lines as well as institutional resilience, as the
government and central bank responded swiftly to the crisis.

• The political turmoil is unlikely to significantly alter Korea’s credit outlook, as government debt is low (around 51% of GDP in 2023) and debt affordability is
strong. Further, low external debt (around 39% of GDP in 2023) limits the risks from exchange rate fluctuations.

• Please refer to the following link for Korea Credit Update Click Here

8
The Americas

9
US: Labor Market Solid, Inflation Somewhat Elevated

Nonfarm Payroll Inflation

350 4.0

300
3.0
250
Thousand

200 2.0

%
150
1.0
100

50 0.0

Jan-24

Nov-24
May-24

Jun-24

Sep-24

Dec-24
Apr-24

Oct-24
Mar-24
Feb-24

Jul-24

Aug-24
0

Sep-24
Jan-24

Jun-24

Nov-24
May-24
Apr-24

Jul-24

Dec-24
Mar-24

Oct-24
Feb-24

Aug-24

PCE Inflation Core PCE Inflation 2% Target

Source: CEIC Source: CEIC

• US economy added 256K jobs in December, the highest in nine months, and the unemployment rate fell to 4.1% from 4.2% in November.

• Headline PCE inflation has picked up to 2.6% in December from 2.1% in September 2024, while core PCE inflation has been sticky around 2.7-2.8%.

• Trump’s proposed trade policies have raised inflation concerns.

• As expected, the Fed kept the policy interest rate unchanged at 4.25-4.50% in the January meet. A 25bps rate cut is now expected in May or June.

10
US: Policies by President Trump During His Initial Days in Office

• The government aims to limit legal/illegal immigration and declared national emergency at the US-
Immigration Mexico border.
and • Mass deportation have begun to Mexico and Colombia.
Citizenship • President Trump’s plan to end automatic birthright citizenship for children of illegal migrants and
those temporarily in US has been blocked by a US federal judge in Seattle.

• President Trump signed an order to exit the Paris climate agreement.

Energy • Trump revoked the previous government’s target for electric vehicles and clean power.
Sector • He plans to open areas of oil/gas exploration by easing regulations & also plans to use resources to
build critical infrastructure to help the process.

• On Feb 1, US announced a 25% tariff on imports from Canada and Mexico, though in few days the
Tariffs decision was put on hold for 30 days, as both the countries agreed to implement strong border
controls amidst negotiations
• US' decision to impose an additional tariff of 10% on China remains.

11
 Canada: Bank Of Canada Expects Lower Growth In Canada Due to Tariffs

Real GDP Consumer Price Inflation

6.0 3.5

5.0 3.0

2.5
4.0
2.0

YoY %
YoY %

3.0
1.5
2.0
1.0

1.0 0.5

0.0 0.0

Feb-24

Mar-24
Jan-24

Apr-24

Jul-24
May-24

Jun-24

Nov-24
Sep-24

Dec-24
Oct-24
Aug-24
Jun-22

Jun-23

Jun-24
Sep-22

Sep-23

Sep-24
Dec-22

Dec-23
Mar-22

Mar-23

Mar-24
Source: CEIC Source: CEIC

• Bank of Canada's benchmark calibration assumes real GDP growth is about 2.5 percentage points lower in the first year of imposing tariffs and 1.5 percentage
points lower in the second year. The benchmark calibration assumes growth to return to normal by the third year of imposing tariffs.

• Canadian consumer prices are expected to rise due to the imposition of tariffs as imports of final consumer goods and intermediate inputs used to produce
final goods from the US make up about 13% of the CPI basket in Canada.

• Bank of Canada's benchmark calibration assumes CPI to increase 0.1 percentage point in the first year due to tariffs. CPI may increase by 0.8 percentage point
if there is a faster tariff pass-through to consumer prices.

12
Canada: Justin Trudeau Resigns as Prime Minister

What led to Trudeau’s resignation?

• Lack of confidence within the party and possibility of a no-confidence motion in the January 2025 parliamentary session.

• More than half of the 153 MPs from the ruling party called for Trudeau’s resignation.

• Deputy Prime Minister, Chrystia Freeland’s resignation also hinted at a crack within the party.

Way Forward

• Trudeau received a prorogation (ending Parliamentary session) of Parliament until March 24, which means no confidence
motion can be passed till then.

• Until then, Trudeau will remain the Prime Minister with powers including statutory authority.

• The next Liberal Party leader is expected to serve as the Prime Minister until October 20, 2025, when the next elections
are due.

• The appointment of the next Prime Minister is crucial to navigate the Canada–US relationship.

13
 Argentina: High Inflation is Cooling Down Led by Food Inflation

Consumer Price Index Constituent Drivers of Decreasing CPI Inflation

350
350
300 300
250
250

YoY, %
200
150
200
YoY, %

100
150 50
0

Nov-23

Jun-24
Jan-24

Nov-24
May-24
Sep-23

Apr-24
Dec-23

Sep-24

Dec-24
Oct-23

Oct-24
Mar-24
Feb-24

Jul-24

Aug-24
100

50
Food & Non-Alcoholic Beverages (weightage-26.9%)
0 Clothing & Footwear (weightage-9.9%)
May-24
Nov-23

Jan-24

Jun-24

Nov-24
Sep-23

Sep-24
Apr-24
Dec-23

Dec-24
Oct-23

Mar-24

Oct-24
Feb-24

Jul-24

Aug-24
Equipment & Home Maintenance (weightage-6.4%)
Recreation & Culture (weightage-7.3%)

Source: CEIC Source: CEIC

• Austerity measures were implemented in Argentina in December 2023, when prices increased by 211% YoY. The measures included cutting public spending,
devaluing the currency, and raising import taxes.

• The measures resulted in cooling down of inflation to 118% in December 2024 from an all time high of 289% in April 2024.

• The decline in inflation is led by Food & Non-Alcoholic Beverages, Clothing & Footwear, Equipment & Home Maintenance, and Recreation & Culture.
14
Brazil: Real Weakens Sharply Led by Investors Concern on Fiscal Woes

Brazil Real Performance (Year End, YoY, %) Federal Public Debt Profile (%)
'-' appreciation, '+' depreciation
27.9 43.7

29.2

22.7
7.3

4.4

-6.5 -5.7
-7.3 Fixed rate Floating rate Inflation linked Exchange rate
2021 2022 2023 2024 2025 (YtD) (SELIC)

Source: CEIC Source: Ministry of Finance, Brazil, June 2024

• Brazilian Real was the worst performing currency with 28% depreciation in 2024 led by scepticism about effective fiscal management by the government.

• Share of floating rate linked debt is at a high of 44% of total government debt, resulting in huge concerns around debt burden with the sharp increase in policy
interest rate by 275 bps since Sep 24.

• Increase in inflation forecast for 2025 from 4.6% to 5.3% (target rate at 3%), and currency depreciation of 28% in a year are worsening the cost associated with
federal debt respectively linked to these variables. To add further to fiscal problems, 20.7% debt is expected to mature by June 2025 and another 14.7% by June
2026.

• With the freezing of expenditure by the government, Brazil has been able to meet its primary deficit target, giving some comfort to investors. The currency
registered an appreciation of 5.7% in 2025 (YTD). 15
Europe

16
Germany: Another Year of Contraction

Germany Faces Two Years of Contraction Business Climate Index Remains Subdued
6.0 100

4.0
95
2.0

0.0 90

85
-2.0
85

-4.0
80
-6.0

-8.0 75
2001
2002
2003
2004
2005
2006
2007
2008
2009

2013

2017
2011

2015
2010

2012

2014

2016

2018
2019
2020
2021
2022
2023
2024

Jan-22

Jan-23
May-22

Sep-22

Jan-24

Sep-24

Jan-25
Sep-23
Jul-22

Nov-22

Jul-23

Jul-24
Nov-23

Nov-24
Mar-22

Mar-23

May-23

Mar-24

May-24
Germany (GDP Y-o-Y%)
IFO Business Climate Index (2015=100)

Source: Eurostat, Ifo Institute for Economic Research Source: Ifo Institute for Economic Research

• Germany’s economy contracted for the second consecutive year, marking the first such decline after early 2000s.

• IFO business climate index plunged to 85.1 in January 2025 lower than the 10 year average of 95.5.

• Going forward, an accommodative monetary policy and declining natural gas prices could provide some relief to the economy.

17
UK: Uncertainty Pushes Up Bond Yields

Business & Consumer Sentiments Remain Subdued UK’s 10-Year Government Bond Yield
Remains Elevated
Composite PMI Index GfK Consumer Confidence Index
5.0
56 50
4.8
40
54 4.6
30
4.4
20
52
4.2
50.4 10
4.0

%
50 0
-10 3.8
48 3.6
-20
-22 -30 3.4
46
-40 3.2
44 -50 3.0

Jan-25
Jun-24
Jan-24

Jan-24

Nov-24
May-24
Apr-24

Sep-24

Dec-24
Oct-24
Mar-24

Mar-24

Jul-24

Aug-24
Jan-23

Jan-24

Jan-25
Nov-22

May-23

Nov-23

May-24

Nov-24
Sep-23

Sep-24
Mar-23

Mar-24
Jul-23

Jul-24

Source: CEIC Source: Refinitiv

• UK Composite PMI has dropped and in the last two months it remained just above the 50-mark threshold.

• While services PMI improved marginally to 51.1 in December (from 50.8 in November), manufacturing PMI dropped to the lowest level in almost a year.

• Consumer confidence in January dropped to the lowest level since end-2023.

• Hike in social security contributions paid by employers (to come into effect from April) have dented hiring expectations.

• Global economic uncertainty resulted in a surge in the UK bond yields in mid-January 2025. 18
Turkiye: Real Interest Rate Turns Positive

Turkiye’s Inflation Below Policy Rate Turkish Lira Continues to Depreciate

90 40
80 Unconventional
35
monetary
70
policies, Very 30
60 high negative
50 real interest 25

USD/TRY
rates
%

40 20
30
15
20
10
10
0 5
Oct-20
Jan-20

Jan-21

Jan-22

Jan-23

Jan-24
Apr-21

Apr-22

Apr-23

Apr-24
Apr-20

Oct-21

Oct-22

Oct-23

Oct-24
Jul-21

Jul-22

Jul-23

Jul-24
Jul-20

Jan-20

Jan-21

Jan-25
May-21

Jan-22

Jan-23

Jan-24
May-20

Sep-21
Sep-20

May-22

May-23

May-24
Sep-22

Sep-23

Sep-24
CPI Inflation (Y-o-Y) Central Bank Policy Rates

Source: Turkstat, BIS Source: Refinitiv

• Turkiye followed an unconventional monetary policy by keeping interest rates low despite high inflation between 2021-H12023 resulting in high Lira
depreciation and an external crisis.

• Post re-election of President Erdogan in May 2023, Turkey returned to conventional monetary policy.

• Inflation in Turkiye has fallen to 44.3% in December 2024 from 64.7% in December 2023, supported by fall in oil and food prices. The central bank has
responded with a cut in policy rate, first since May 2023.

• Lira continues to depreciate amidst global uncertainty, but the rate of depreciation has slowed. 19
Africa

20
 Mauritius: Navigating New Data Amidst Political Change

Revised GDP Growth Revised Public Sector Debt Trajectory

15 100
90
10
80
5 70

% of GDP
60
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 50
%

-5 40
30
-10
20

-15 10
0
-20 2015 2016 2017 2018 2019 2020 2021 2022 2023
Old GDP at market prices New GDP at market prices
Old Public Sector Debt New Public Sector Debt

Source: Statistics Mauritius Source: Ministry of finance, Mauritius

• The new government has revised downwards the GDP growth for 2023 and 2024 to 5.6% and 5.1% respectively (from 7.0% and 6.5%), attributed to
reassessment of the construction sector.

• Ratio of public sector debt (PSD) to GDP revised to 84.4% of GDP for 2023 from a previous 77.6%. This is due to the incorporation of debt incurred by
non-financial public sector entities which was previously being netted out of government securities.

• Revision in fiscal deficit for FY24/25 to 6.7% from 3.4%. On this front, we will look to the 2025 Budget for more details.

21
Nigeria: 3-Decade High Inflation, but Some Reprieve Expected

Nigeria Headline and Food Inflation Old and New CPI weights (%)
45%
39.8%
Division Name* Old New
40%

35% Food and non-alcoholic beverages 51.8 40.1

30%
34.8% Housing, water, electricity, gas and
25% 16.7 8.4
other fuels
20%
Clothing and footwear 7.7 5
15%

10% Transport 6.5 10.7

5%
Furnishings and household
5 3
0% equipment
Dec-05

Dec-12

Dec-15

Dec-20
Dec-21
Dec-07
Dec-08
Dec-03
Dec-04

Dec-10
Dec-06

Dec-09

Dec-17
Dec-11

Dec-18
Dec-13
Dec-14

Dec-16

Dec-19

Dec-22
Dec-23
Dec-24
-5% Education services 3.9 6.2
-10%

Headline inflation Food inflation Health 3 6.1

Source: Central Bank of Nigeria Source: Nigeria National Bureau of statistics; * selected items

• Nigeria is battling 3-decade high inflation rates, with inflation at 34.8% in December 2024.

• Liberalisation of their currency Naira (in 2016) and reduced oil subsidies, along with global supply bottlenecks have contributed to high inflation.

• Despite the Central Bank of Nigeria (CBN) raising rates (875bps in 2024 alone), inflation has remained sticky.

• Going forward, some reprieve to inflation is expected due to the rebasing and weight adjustments of the CPI basket.
22
CareEdge Sovereign Ratings

23
 CareEdge Global: Long Term Foreign Currency Rating*

Germany France Spain Indonesia Colombia Egypt

CareEdge AAA CareEdge AA- CareEdge A CareEdge BBB CareEdge BB+ CareEdge B-

Netherlands Japan Chile Italy Greece Bangladesh

CareEdge AAA CareEdge AA- CareEdge A- CareEdge BBB CareEdge BB+ CareEdge CCC+

Singapore Korea Malaysia Mauritius Vietnam Argentina

CareEdge AAA CareEdge AA- CareEdge A- CareEdge BBB CareEdge BB+ CareEdge CCC

Sweden UAE Thailand Mexico South Africa Ethiopia

CareEdge AAA CareEdge AA- CareEdge A- CareEdge BBB- CareEdge BB CareEdge D

Australia United Kingdom Botswana Morocco Turkiye

CareEdge AA+ CareEdge AA- CareEdge BBB+ CareEdge BBB- CareEdge B+

Canada Portugal India Peru Nigeria

CareEdge AA+ CareEdge A+ CareEdge BBB+ CareEdge BBB- CareEdge B

United States China Philippines Brazil Ecuador

CareEdge AA+ CareEdge A CareEdge BBB+ CareEdge BB+ CareEdge B-

*as on Oct 3, 2024

24
Contact

Rajani Sinha Chief Economist rajani.sinha@careedge.in +91 - 22 - 6754 3525

Anurag Chandra Senior Economist anurag.chandra@careedgeglobal.com +91 - 22 - 6754 3518

Shruti Ramakrishnan Senior Economist shruti.r@careedgeglobal.com -

Zaakirah Ismail Senior Economist zaakirah.ismail@careratingsafrica.com -

Akanksha Bhende Economist akanksha.bhende@careedge.in +91 - 22 - 6754 3424

Mihika Sharma Economist mihika.sharma@careedge.in +91 - 22 - 6754 3538

Amya Parmar Associate Economist amya.parmar@careedgeglobal.com -

Ankita Sharma Associate Economist ankita.sharma@careedgeglobal.com -

Girisha Algoo Associate Economist girisha.algoo@careratingsafrica.com -

Shobana Krishnan Consultant c-shobana.krishnan@careedge.in +91 - 22 - 6754 3456

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