December 31, 2024

Geopolitical Shocks and Climate Change Will Remain Biggest Risks in 2025, Says EIU Report

"Hopes that the world will one day return to normal have been continually dashed since the covid-19 pandemic, and 2025 will be no different," the Economist Intelligence Unit (EIU) says in its Industry outlook 2025 report that explores the challenges, opportunities and trends to watch in the following six industries: energy, financial services, consumer goods and retailing, technology, automotive, and healthcare. The report further says: "Although working and travel patterns are normalizing, the economic and political outlook remains uncertain. EIU forecasts that real GDP will grow by a subdued 2.6% in 2025, similar to 2024 but slower than the average for the ten years before the pandemic." What is more, "The US economy will slow as labor markets tighten, but China's will accelerate slightly, amid stimulus and reviving trade. Those of the EU and Japan will also tick up, but only smaller developing markets such as India will deliver significant growth."

Geopolitical tensions and trade barriers will force more shifts in supply chains, amid subdued business growth. The EIU also presents the following predictions for 2025:
  • Inflation is expected to ease, allowing for further monetary easing.
  • Prices for agricultural and energy commodities will fall, but those for industrial raw materials will rise.
  • Geopolitical risks will persist amid wars in Ukraine and the Middle East, while rising trade barriers between the EU, the US and China will reshape supply chains.
  • Climate change will increase geopolitical tensions. National climate pledges will be updated at COP30 in November 2025, but much will depend on US leadership.
  • Investment in technology, especially artificial intelligence (AI), will remain strong, but tech companies will face regulatory pressures, investor impatience and scrutiny over energy usage.

According to the EIU, "Falling inflation will allow monetary easing to continue. We expect the Federal Reserve (Fed, the US central bank) to cut interest rates by a further 50 basis points during 2025. We also expect prices for agricultural commodities and industrial raw materials to move in different directions in 2025- 26. Although agricultural prices will continue to trend downwards, prices for industrial raw materials will rise again, particularly for base metals that benefit from the green transition. As for energy commodities, prices will fall on average, but remain at risk from political shocks."

The UK-based company provides the following key global forecasts for each sector covered by its report:
  • Energy: Fossil-fuel markets will continue to face geopolitical risks amid conflicts in the Middle East and Ukraine, but investment into renewables will remain strong, particularly in China.
  • Financial services: Falling interest rates will weigh on bank profit margins, leading to lower dividend payouts, but the Basel III endgame will be eased or delayed further.
  • Consumer goods and retailing: Global retail volumes will expand by 2.2%, helped by disinflation, but regulations around online retailing will tighten further, particularly for high-volume low-price Asian retailers such as Shein and Temu.
  • Technology: More countries will start using satellite internet, but use cases will be limited to enterprise clients—military and maritime. Amazon's Kuiper will disrupt the market duopoly of Starlink and EutelSat OneWeb.
  • Automotive: After a difficult few years, annual new-vehicle sales will reach a record 97.2m units in 2025. We forecast that sales of new cars will rise by 2%, commercial vehicles by 4% and electric vehicles by 16%.
  • Healthcare: Global healthcare spending will outpace inflation, growing by 1.9% in real terms. The World Health Organization will make climate change the focus of its 14th four-year general program, which starts in 2025.
Companies and investors alike should take note that geopolitical shocks and climate change will remain the biggest risks in 2025. The EIU's "baseline forecast assumes that another large-scale war will not break out in Asia or the Middle East. However, the continued threat of geopolitical conflict, in addition to the continuing war in Ukraine, will lead to economic reconfiguration and policy divergence." Moreover, "The EU and the US are already raising barriers against Chinese exports in areas from  automotive and technology to healthcare. Chinese retaliation is likely to intensify in 2025 as rival blocs emerge across the world. These trends," according to the report's authors, "will reshape supply chains over 2025, and could upend our forecast of falling commodity prices and inflation."

Regarding climate change and how efforts to mitigate it will play in these political rifts, the report notes that "At COP30 in November 2025 governments are due to update their national climate pledges (NDCs), but much will depend on US leadership. The debate over environmental, social and governance (ESG) reporting will intensify as regulations enforcing disclosure come into effect in the EU and elsewhere." In addition, "EU climate regulations, due to come into force from 2026, will also have an international impact on trade by forcing multinational companies to monitor their supply chains."

While investment in technology, particularly AI, will be strong as projects gather pace, "technology companies will face pressure from several directions as regulations tighten (particularly in Europe), investors become more impatient for profits and their energy usage comes under more scrutiny." I agree with the EIU that "Companies will need to navigate these new requirements, while also trying to reconfigure their supply chains and seek out areas of growth."

What challenges, opportunities and trends are you watching as we celebrate the beginning of 2025?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

December 20, 2024

Deliver on the Promise of AI, Unlock the Value of Data, and Eight Additional Opportunities for Tech Companies in 2025

In its "Top 10 Opportunities for Technology Companies in 2025," EY, a consultancy, explains that its report published in December 2023 "highlighted the need for tech businesses to reshape, reposition and innovate for success in a world led by generative artificial intelligence (GenAI). Throughout 2024, AI use-cases and copilot deployments surged across industries; however, many reached a plateau – often because companies were not fully prepared for the cost and organization-wide transformation to enable success."

The report adds that "To get ahead, tech companies – and their customers – need to move away from viewing AI as a capability applied to traditional business processes and instead fundamentally rethink and reinvent their business to operate in an AI-first era. Tech companies themselves can lead here by demonstrating their own internal transformation journey using their own products ('tech on tech')."

I agree with the assertion: "As 2025 unfolds, the acceleration of AI adoption will continue, but it will be against a backdrop of increasing capital needs, heightened global regulatory oversight and shifting economic landscapes."

The report's authors explain that "In compiling our annual Top 10 Opportunities for Technology Companies in 2025, we've attempted to provide a balanced, future-oriented view of the potential actions for tech companies across various growth and operational levers to drive value creation in 2025." Below are EY's Top 10 Opportunities for Technology Companies in 2025:
  1. Deliver on the promise of AI: Transform potential into performance
  2. Drive growth and optimize customer experience through an agentic AI future: Harness next-generation, semi-autonomous AI "agents" to create new customer offerings.
  3. Adopt outcome-based pricing models to supplement subscription and consumption offerings: Get ahead of customer expectations with pricing that corresponds to customer value realization.
  4. Demonstrate the power of an AI-first operating model: Rethink business models and processes to boost operational agility driven from AI.
  5. Unlock the value of data: Assess opportunities to modernize and consolidate legacy systems to better harness the power of enterprise data.
  6. Empower your workforce of the future with innovative training: Boost productivity and evolve skill sets for the era of AI.
  7. Embed tax and legal functions at the outset of AI transformations: Improve strategic decision making by addressing rapid changes in tax, trade and compliance requirements by addressing them up front – not as an afterthought – to optimize business models and supply chains.
  8. Inject AI into cyber defenses: Tech companies that embed AI-driven security solutions will not only protect their assets but also position themselves in the market as leaders in trusted innovation.
  9. Move beyond contingency funds to free up capital to invest in emerging technologies: Free up resources by divesting non-core businesses/products to invest in high growth opportunities and drive sustainable growth.
  10. Shape the agenda for incoming regulators: Actively engage with regulatory bodies to structure future frameworks and drive more consistency in regulatory outcomes.

The report concludes by explaining: "In 2025, tech companies have the opportunity to translate the excitement and expectations around AI into tangible business benefits for themselves and their customers. Seizing these 10 opportunities highlighted can help accelerate this goal, and in the process, shape tech companies AI-enabled business of the future."

How is your business utilizing AI to achieve tangible benefits for your team and your customers?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.