As we close out 2024, chief financial officers (CFOs) and corporate strategists are turning their attention to the economic landscape of 2025, which promises to be a year filled with significant challenges and opportunities. 
After 2024’s roller-coaster ride of inflationary pressures, supply chain disruptions, and sweeping political changes, companies will be preparing for a new phase of global economic uncertainty. The priorities for CFOs in the year ahead will likely revolve around managing risks, navigating regulatory changes, and identifying investment opportunities that can sustain long-term growth despite short-term turbulence.
CFOs are facing a highly uncertain economic environment in which growth may be slower than expected.
The global economic outlook for 2025 presents a somewhat mixed picture. Inflation, particularly in the US, is likely to remain more persistent than initially anticipated. US inflation rose to 2.7% in November 2024, and economists are concerned about the impact of President-elect Donald Trump’s proposed policies, such as tariffs and tax cuts, which could stoke inflation. 
While many economists reckon interest rate cuts will provide some relief, the reality is that the cost of capital is likely to stay relatively high. The US central bank cut interest rates in December by a quarter of a percentage point to a target range of 4.25%-4.5%. Federal Reserve chair Jay Powell, however, signaled a slower pace of rate cuts for next year, so the prospect of ultra-cheap money seems increasingly distant.
Most economists now anticipate the US rate to stay at 3.5% or higher by end-2025, largely due to Trump’s proposed tariffs and their inflationary impact. This leaves CFOs facing a highly uncertain economic environment in which growth may be slower than expected. 
For businesses, managing cash flow in this environment will be crucial. In 2025, US interest rates will probably keep borrowing relatively expensive – rates are currently at their highest level since before the financial crisis in 2007 – forcing companies to reassess their debt levels and financing strategies. With loans costing more, businesses will need to evaluate how much debt they can afford to take on and may shift toward using internal funds, like profits, instead of relying on external financing. 
These higher borrowing costs will also likely slow down expansion plans, as companies may delay or scale back investments in new equipment, facilities, or hiring. This could ultimately hinder growth and impact long-term profitability, making cash flow management more critical than ever.
On the geopolitical front, the possibility of escalating tensions between the US and China, the world’s two largest economies, looms large. Trade wars and the imposition of tariffs could disrupt global supply chains even further. Trump has proposed a 20% tariff on all US imports, rising to a staggering 60% on Chinese goods. 
As businesses scramble to protect themselves from the fallout, managing political risk and uncertainty will be essential.
With uncertainty running high, it’s increasingly clear that traditional, single-point forecasts may no longer be sufficient. CFOs will need to adopt a more flexible approach by using scenario analysis to model a range of potential outcomes. 
This means preparing for various economic conditions, whether that’s a deeper recession, sustained inflation, or a period of rapid economic growth, and understanding how each scenario could affect business strategy.
Moreover, with trade tensions between the US and China continuing to simmer, companies will be looking to reduce their reliance on Chinese manufacturing and suppliers. 
This could spur further investment in Southeast Asia, particularly in countries like Thailand, Vietnam, and Malaysia, where businesses are relocating or expanding their operations to mitigate the risk of tariffs. 
Southeast Asia’s commercial real estate market is also expected to see increased demand, with businesses seeking out new hubs for manufacturing and logistics.
While China is grappling with ongoing economic struggles – particularly in the real estate sector, where a property crisis has sapped domestic consumption – Southeast Asia is expected to outperform other regions in terms of economic growth. The International Monetary Fund projects a 4.3% growth rate for Asia in 2025, with Southeast Asia leading the way. 
In contrast, Europe faces a tough road ahead, with Germany already teetering on the edge of recession due to a struggling automotive sector and high energy costs. The challenges faced by major industrial players like Bosch, which recently announced up to 5,500 layoffs, will reverberate through the broader European economy.
For CFOs in Europe, managing energy costs will remain a critical concern. As the continent deals with its own energy transition challenges, as well as the fallout from the war in Ukraine, businesses will be under pressure to find cost-saving measures to help them remain competitive. So bad is the situation that Norway plans to sever energy links with Europe as electricity prices soar to six times the EU average.
The push for energy efficiency will also dovetail with stricter environmental regulations in the EU, which is expected to continue tightening its rules on carbon emissions.
This creates a complex, global regulatory environment in which CFOs must balance the need for growth with the risk of non-compliance. In the US, the potential rollback of environmental and labor regulations under the incoming Trump administration could provide a short-term boost to companies. Notably, the US stock market has gained since the November presidential election.
However, this deregulation could lead to significant longer-term risks, particularly if it results in increased environmental damage or worsens social inequalities, which could eventually spark a consumer backlash or regulatory pushback.
Meanwhile, environmental, social, and governance (ESG) investing has been a central focus for businesses in recent years. And even though ESG fatigue is starting to set in, as some firms question the financial return on investment from their green initiatives, regulation continues to march on.
The EU’s Corporate Sustainability Reporting Directive (CSRD), which came into force in 2023, mandates detailed reporting on ESG issues, including greenhouse gas emissions across a company’s entire value chain. The first reports are due in 2025.
For companies operating in the EU, this regulation will require a renewed focus on sustainability efforts and a more rigorous approach to tracking and reporting emissions. CFOs will need to ensure that their organizations are prepared to meet these new disclosure requirements, which could have far-reaching implications for operational strategy and corporate reputation.
Companies that fail to comply with the CSRD could face significant penalties, making it essential for CFOs to prioritize investment in sustainability reporting systems.
At the same time, some companies may look for opportunities to “greenify” their operations by investing in energy-efficient infrastructure, such as buildings and production facilities.
By lowering energy demand, companies can reduce their exposure to volatile energy prices while also satisfying environmental regulations. These dual benefits – cost savings coupled with sustainability gains – could become an important corporate strategy in 2025.
One of the biggest uncertainties hanging over the global economy is the possibility of a return to the protectionist policies under the incoming Trump administration. The looming threat of further tariffs on Chinese goods could disrupt global supply chains even more, making it imperative for companies to rethink their sourcing strategies.
The ongoing trade tensions could also have a broader impact on global supply chains, potentially pushing up costs and dampening economic growth. For CFOs, managing the risks associated with tariffs and trade wars will require close monitoring of developments in Washington and Beijing, as well as the broader geopolitical landscape.
For businesses with significant exposure to China, this could mean accelerating efforts to diversify supply chains away from China and into other parts of the world. This trend toward “China plus one” will likely continue, with companies looking to Southeast Asia, Mexico, and even India as alternatives to Chinese manufacturing hubs. 
However, as Mexico has indicated that it may retaliate with its own tariffs in response to any aggressive trade policies, businesses will need to monitor developments closely and ensure they have contingency plans in place.
Given the uncertainties around global trade, inflation, and economic growth, businesses will need to focus their investments on areas that offer the best potential for resilience and long-term profitability. This may include sectors less dependent on global supply chains, such as technology, especially artificial intelligence (AI), and clean energy.
AI will continue to be a focal point for companies looking to drive cost reductions and efficiency gains, with CFOs sitting on vast amounts of data that can be leveraged to identify opportunities for optimization. The question will be how to harness this data in a way that generates real value rather than simply cutting jobs in the name of efficiency.
For businesses operating in the EU or the UK, significant investments in sustainability will be required to stay ahead of new regulations. The implementation of the CSRD in the EU and the Sustainability Disclosure Requirements in the UK (expected to land in 2026) will force companies to disclose their environmental impact in greater detail, making it imperative for firms to invest in reporting systems and sustainability initiatives.
Ultimately, 2025 will be a year marked by high levels of uncertainty and volatility, with inflation, geopolitical tensions, and regulatory shifts all contributing to a challenging environment. But as always, the key will be in managing risks while seizing opportunities where they arise.
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