As we move into 2025, it is crucial to acknowledge the economic hardships that businesses have faced over the past six months. Soaring energy prices, persistent inflation on essential goods and steep interest rates. So, what does 2025 hold?

For CEOs navigating these turbulent times, it’s essential to understand and address the following six critical challenges:

1. Global economic shifts
   The global economy is undergoing a significant realignment, with emerging markets, particularly China and India, now at the forefront of global growth. These nations currently account for nearly 59 per cent of global GDP, up from just 37 per cent in 1980. Meanwhile, advanced economies are grappling with slower growth, ageing populations and economic stagnation.
2. The productivity puzzle
   Despite technological advancements, productivity growth remains a challenge. In the US, sectors like healthcare and manufacturing are benefiting from automation, but Europe is lagging due to structural barriers such as rigid labour laws. Countries that fail to address this productivity gap risk losing their competitive edge on the global stage.
3. A world divided
   Globalisation is gradually giving way to protectionist policies, reshaping trade dynamics as evidenced by US-China tariffs and post-Brexit shifts. Businesses are transitioning from global to regional supply chains, which, while reducing geopolitical risks, can increase costs and diminish economies of scale.
4. Demographic realities
   In ageing economies, shrinking workforces are threatening productivity. Countries like South Korea face significant long-term consequences if corrective actions are not taken. On the other hand, younger populations in emerging markets present new opportunities, though they will require investments in education and infrastructure.
5. Europe’s opportunity or crisis?
   Europe’s competitiveness is dwindling, with structural inefficiencies holding back growth. However, initiatives such as the European Green Deal could reinvigorate the region through investment in green technology and digital infrastructure.
6. De-globalisation: A new normal
   As de-globalisation continues, businesses must adapt to a fragmented world. Regionalisation offers shorter supply chains and reduced exposure to geopolitical risks, but it also limits economies of scale.

As part of ERA Group’s 2025 outlook series, we hosted a webinar with renowned global economist Antonio Fatás. He warned: “We have seen economic power shifts across continents and we are entering a multipolar world with no single country dominating the world economy. This creates an uncertain environment at a time of increasing geopolitical tensions and global challenges like climate change.”

Fatás paints a picture of a world where power is shifting from advanced economies to emerging markets, technology’s role is evolving and geopolitical tensions are reshaping global alliances. However, challenges such as demographic decline and the need for international cooperation on issues like climate change will be critical in the years ahead.

Fatás also delves into the productivity paradox, noting that while technologies like the internet historically drove productivity, recent advances, such as artificial intelligence, have yet to show a significant impact.

He points out that “technology is helping us a lot less today than it used to a few decades ago”. He also highlights that the US has seen some recent productivity improvements due to AI, though Europe has not yet experienced similar gains, which he describes as “a wake-up call for all of us.”

On a more optimistic note, Fatás emphasises the resilience of the global economy, citing the lack of a recession in 2023 and the continued recovery post-Covid. He adds that “more people are working today than ever,” challenging the earlier fears of a “great resignation” and reinforcing hope for the years ahead.

Given the level of uncertainty businesses are facing today, it is more important than ever to step back and assess where things stand. For business leaders, navigating these complexities requires strategic insight and specialised expertise.

For more than 30 years, ERA Group has pioneered business strategy and cost optimisation. Today, we leverage data, analytics and a global network of experts to help clients validate and improve processes, turning insight into opportunities.

With more than 40,000 projects completed across six continents, ERA Group empowers organisations to grow, build competitive advantage and drive bottom-line impact. We offer deep expertise in over 50 expense categories and hundreds of subcategories, bringing diverse perspectives to drive change for our clients. ERA Group is the resource today’s leaders need as they navigate a new horizon, face unforeseen challenges, and seek new opportunities.

Visit our website to access content surrounding our latest campaign: download the whitepaper, watch the webinar or view the key takeaways.