The Global Economy in a Phase of Multiple Crises

The global economy is entering a phase of heightened fragility. While a complete collapse has been avoided in recent months, momentum has clearly stalled. Coface forecasts global growth of just 2.2 percent for 2025 in its baseline scenario – a significant step back from previous years. If the temporarily suspended U.S. tariffs on China and other trading partners are reinstated, growth may even fall below the 2 percent mark (see Figure 01).

This trend particularly affects export-dependent countries and industries. Uncertainty surrounding U.S. trade policy and geopolitical conflicts – such as between Israel and Iran – is leading to a global investment slowdown. Inflation remains volatile: while the U.S. is expected to see an increase to around 4 percent, some emerging markets are benefiting from falling commodity prices and a weaker dollar. However, upside risks remain, especially in the event of oil price shocks.

Figure 01: Global Real GDP Growth Forecast until 2026 [Source: Coface Risk Review]

USA: Economic Policy Between Chaos and Calculation

The direction of U.S. economic policy remains unclear. On one hand, the administration signals determination in its “trade war”; on the other hand, several de-escalation attempts have been made since May. Nonetheless, uncertainty remains high. Although initial court rulings have deemed flat tariffs unlawful, alternative legal instruments like Section 232 or Section 301 could be reactivated.

The economic consequences are complex: despite a slight GDP contraction in Q1, both the labor market and inflation remain stable. However, many companies have brought forward imports, artificially inflating current demand. The next quarters may therefore weaken as this preloaded consumption subsides and rising input prices take their toll. The data remains contradictory, and forecasts are cautious (see Figure 02).

Figure 02: USA – Perceived Recession Probability and Trade Policy Uncertainty [Source: Coface Risk Review]

Europe: Caught Between the U.S., China, and Structural Challenges

Europe finds itself in the geopolitical crossfire. The EU is disproportionately affected by U.S. tariff policy due to its deep integration in global value chains. Germany benefited early in the year from pre-order effects in exports, but sustainable momentum is lacking. Major economic policy decisions – such as those on infrastructure or energy – remain postponed.

France suffers from stagnant consumption and investment reluctance (see Figure 03). A significant upswing is not expected before 2027. Italy’s economy is hindered by its dependence on the U.S. market, whereas Spain benefits from tourism, immigration, and EU funding. In the UK, tax hikes burden the economy, but reform projects and rate cuts may bring medium-term stability.

Figure 03: Real Disposable Household Income in Western Europe (Q1 2022 = 100) [Source: Coface Risk Review]

Asia: China’s Stability, India’s Momentum

China remains an economic anchor, at least in the short term. A strong first quarter – supported by early export shipments, public investments, and consumption subsidies – has led to a slight upward revision of growth forecasts. However, a decline is expected in the second half as stimulus fades and problems in the real estate sector resurface (see Figure 04).

India, meanwhile, is becoming the region’s growth engine. The strong Q1 performance was driven by massive infrastructure spending ahead of the fiscal year-end. However, this pace is unsustainable. Consumption remains a pillar, but rising credit costs and global uncertainty weigh on export prospects.

Figure 04: Growth Drivers in China, Q1 2025 [Source: Coface Risk Review]

Latin America: Diverging Outlooks

Mexico remains under pressure. Its dependence on the U.S. market and weak domestic demand are stalling growth. Coface expects stagnation for 2025. Brazil, on the other hand, has benefited from a strong agricultural sector and increasing consumption. However, interest rates of 15 percent continue to strain financing conditions.

Argentina presents a positive surprise: liberalization measures, reduced capital controls, and more stable inflation are fostering investor confidence (see Figure 05). Coface forecasts 5 percent growth in 2025. Structural risks remain, however – particularly regarding foreign reserves and debt composition.

Of particular note is President Javier Milei’s new economic agenda. Inspired by the Austrian School of Economics, his government pursues aggressive deregulation, fiscal discipline, and a radical rollback of the state. The elimination of price controls, market liberalization, and strict budget consolidation have begun to show results: investor confidence is rising, capital is returning, and inflation is easing sustainably. Milei’s libertarian course is seen as a model experiment for other countries. He explicitly cites Austrian School thinkers such as Ludwig von Mises, Friedrich August von Hayek, and Murray Rothbard. Their ideas – including individual liberty, free markets, non-interventionism, and rejection of central banking – underpin Milei’s economic philosophy, making Argentina a real-world testing ground for radical libertarian reform.

Figure 05: Argentina – Fiscal Balance and Inflation [Source: Coface Risk Review]

Corporate Insolvencies: A New Normal?

Corporate insolvencies remain a major concern in 2025. The pandemic-era exception of low insolvency rates is definitively over. In over 80 percent of developed economies, insolvencies are now above pre-2019 levels. Japan, Australia, and several European countries are particularly affected (see Figure 06).

The causes are manifold: high financing costs, ongoing supply chain issues, declining demand, and reduced pricing power. In North America, pressure is also rising – especially in rate-sensitive sectors. Coface expects global insolvencies to continue rising into 2026.

Figure 06: Corporate Insolvencies (Index, 2019 = 100), 3-Month Moving Average [Source: Coface Risk Review]

Sectors Under Pressure: Metals as a Leading Indicator

No sector is as heavily affected as the metal industry. Eight countries have seen downgrades. Overcapacity, rising energy costs, and falling demand are putting global pressure on this sector – particularly in Europe, Canada, Mexico, and South Korea.

The automotive and chemical industries are also suffering. In countries such as France, Germany, and the UK, several sectors have been downgraded. Causes include rising production costs, declining sales, and aging infrastructure. Digitalization alone will not be enough to offset this structural transformation.

Conclusion: Managing Economies Under Risk

The Coface Risk Review illustrates vividly: the global economy is navigating a period of multiple crises. Geopolitics, protectionism, inflation, and mounting debt form a volatile mix. Businesses and governments must adopt scenario thinking, build resilience, and actively manage risk exposure.

Despite some bright spots – such as in India and Argentina – the overall outlook is troubling. Investment remains subdued, supply chains fragile, and political will for cooperation weak. Without structural reform and multilateral coordination, this economic regression is unlikely to remain a temporary setback.