Demographic ageing, decelerating productivity growth, energy transition, and technological competition: advanced economies are confronted with a range of interconnected challenges. In reaction, industrial policies are resurfacing, intensifying global competition. However, there is a risk that these disjointed efforts may spark a race to outdo each other, creating both winners and losers.
United States: A paradox of decline perception and economic resilience?
Donald Trump's victory and the revival of the Make America Great Again movement reflect a desire to counter what many see as America's decline. However, with GDP per capita 10% higher than in 2019, compared to just 2-3% in Japan and the Eurozone, doesn't the U.S. economic performance over the past two years highlight its exceptionalism?
The degree to which the US has outperformed other industrialised economies should not be understated.
Policy support - monetary and fiscal - has been very generous in order to avoid any demand problems, as after the 2008 during the Great Recession.But the main difference with the rest of the world in the post-Covid recovery is that the United States has outstripped everyone in terms of productivity growth: I'm even worried that demand is increasing too much and leading to overheating!
Beyond that, the deficit is a worrying factor: stimulus measures in the middle of an expansion would only exacerbate inflation, and the dollar's extra margin in relation to debt is not infinite.
Marcos Carias, Coface economist for North America.
Is the UK bouncing back after the Brexit turmoil?
Following a turbulent political period, the UK now has solid grounds to anticipate more stability and appears to be steadily recovering. Coface has recently upgraded its country risk assessment for the UK to A3. Despite its many strengths—such as favorable demographics, prestigious universities, a high-end manufacturing sector, and key financial and legal hubs—fundamental challenges persist, including unsustainable public finances, regional wealth and education disparities, underinvestment, and low productivity.
However, it should be a better year for demand, both from households and governments.
Easing corporate insolvencies and lower interest rates should also support this along with important pro-growth policies in the pipeline: the Planning Bill in March should support the construction sector (among others) and industrial policies in the first half of the year should support investment.
Jonathan Steenberg, Coface economist for the United Kingdom, Ireland and the Nordic countries
Germany: is confidence the key to reviving Europe's economic engine?
Once the leader of the European economy for much of the last decade, Germany has been grappling with a range of intense challenges in recent years. The country is significantly affected by declining competitiveness and the energy transition, which poses considerable growing pains for one of the world's largest industrial sectors, centered around automotive and mechanical engineering.
Our automotive sector has long been producing past the demand, our large bureaucracy prevents us from reacting quickly, and our main customers are the United States and China, who have been engaged in a trade war for years.
Finally, the energy crisis has caused our production costs to skyrocket. Beyond the clear structural problems, Germany technically has all the cyclical ingredients for a noticeable recovery: rising purchasing power, lower interest rates, investment capacity.
But what we need is confidence. And it will take time to get it back. For this year, we are therefore only expecting minimal growth of 0.2%.
Christiane von Berg, Coface economist for Germany, Benelux, Austria and Switzerland
Economic stagnation: diverging trends in Asia-Pacific?
Japan has faced economic stagnation for several decades, exacerbated by rapid population ageing. These factors pose a significant risk, potentially leading to stagnating or even declining living standards under demographic pressures. However, Asia-Pacific remains a dynamic and diverse region: even among advanced economies, growth rates vary. Taiwan and South Korea benefit from their technology-driven economies but are overly reliant on specific sectors and face development challenges. Singapore, closely integrated into global supply chains and finance, feels the impact when global growth slows. Lastly, Hong Kong is bearing the brunt of China’s economic slowdown.
There are winners and losers among the advanced Asian countries. In 2024, resilient trade was the cornerstone of Asia's growth. Rising global economic policy uncertainty is mainly reflected expectations of increased trade frictions. This means weaker manufacturing and trade activity.
By 2025, we expect growth to slow in advanced export-oriented economies such as Taiwan, South Korea and Singapore. Japan, on the other hand, should rebound: consumer spending and business investment should stimulate growth and help offset any weakness in exports.
Bernard Aw, Coface Chief Economist for the Asia Pacific region
Productivity gains: leading to a collective decline on the global stage?
Could the solution for advanced economies lie in the pursuit of productivity gains? However, to maintain living standards, the current rate of productivity growth observed over the past decade would need to double.
By focusing on the specific challenges that each country faces, the advanced economies are fueling competition instead of cooperation. This could lead to a bidding war, generating de facto winners and losers, but above all it risks weakening them collectively in the global order.
Ruben Nizard, Coface Head of Sectorial Research and Political Risk.
Will all the advanced economies stay ahead? All the insights of our economists to be found in this replay of the Coface Country Risk 2025 Conference
Find out more about the risks to monitor in 2025:
- Explore our latest Country and Sector Risk Barometer: 'Into the Wild'
- Download the 2025 Country Risk Handbook, the essential tool for managers.
