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“If you don’t move forward, you fall off the bike,” is the warning from the European Bank for Reconstruction and Development’s chief economist, Beata Javorcik.
ADVERTISEMENTWill the second Trump presidential term be the key influence on the global economy of 2025?
According to the European Bank for Reconstruction and Development (EBRD), it’s one of many causes for concern.
“The unwinding of globalisation is going to have negative consequences for the global economy,” Beata Javorcik, chief economist at EBRD, told Angela Barnes in the latest episode of The Big Question.
Fragmentation of the global economy
Beata’s two key concerns for 2025 are the impact of ongoing conflict and fragmentation of the global economy. She cited Brexit, the US-China trade war and Russian sanctions as long-term issues continue to pose economic risks.
For Europe to prosper, she explained, the bloc needed to heed the warnings set out in Mario Draghi’s 2024 The Future of European Competitiveness report.
“Europe will not be able to maintain its standards of living if it continues on its current path.
“But paradoxically, the shocks that Europe may experience in 2025 may focus minds and lead to action. It may be a now or never moment for Europe,” Beata added.
While Europe is currently awaiting further news on the proposed US trade tariffs, it’s not the only American move set to cause shock waves across the globe.
“Should the US Federal Reserve have to keep interest rates high for longer, this will translate into higher borrowing costs for emerging markets,” Beata explained.
“Many developing countries and emerging economies already are weighed down by a heavy burden of debt accumulated partially during the pandemic times.
“And high interest rates make the cost of servicing the debt quite high. Yes, inflation has helped to lessen the debt burden, but this burden remains quite substantial. And that’s a concern.”
How are sanctions affecting the Russian economy?
Although it’s still unclear how new Russia-US relations will unfold over the next four years, Beata expressed that right now, Russia is starting to suffer the consequences of prolonged sanctions.
While some of the loss of trade from Europe has been filled by exports from China and Turkey, it’s not a direct replacement.
“The technological content of those exports is different and you see in the data that foreign affiliates located in those countries choose not to supply the Russian market.”
She also added that, as multinational companies have continued to exit the Russian market, this has led to cessation of new foreign direct investment (FDI).
ADVERTISEMENT“That means lower knowledge flows,” Beata explained.
“These are the effects that are not visible immediately. They work slowly, but they certainly are beginning to take a toll on the Russian economy.”
Where in Europe will we see growth in 2025?
Fortunately, 2025 isn’t all doom and gloom with Beata adding that she’s “very optimistic about services in emerging Europe”.
While the increased implementation of AI is set to affect eastern and western European job markets in completely different manners, Beata sees Eastern Europe thriving in the IT services sector.
ADVERTISEMENT“The fact that many of them are in Schengen, in the same time zone, have the same data protection regime as the Western European countries bodes well for greater exports of services.
“As companies are considering their carbon footprint, they are discovering that carbon emissions embodied in services they buy constitute a big chunk of that carbon footprint. So the proximity of Eastern European countries makes them more attractive as suppliers of ICT services.”
The Big Questionis a series from Euronews Business where we sit down with industry leaders and experts to discuss some of the most important topics on today’s agenda.
Watch the video above for the full conversation with Beata Javorcik from EBRD.
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