Nomura expects a sharp GDP growth slowdown to 5.8% in 2025 from 6.5% in 2024, resulting in 100bp worth of policy rate cuts.
“We expect a sharp GDP growth slowdown to 5.8% in 2025 (Consensus: 6.7%) from 6.5% in 2024, resulting in 100bp worth of policy rate cuts (Consensus: 50bp),” Nomura said in a note.
The brokerage sees more turbulence in the rest of Asia.
“Even with continued strong AI-led chip demand, we expect an export downturn due to Trump’s tariffs and a downswing in the broader tech cycle. Our domestic demand outlook, however, is more varied across Asia, driving economic outperformance in Japan, Malaysia and the Philippines, but underperformance in India, South Korea and Thailand,” it said.
Nomura expects lower inflation in Asia than in other regions, in part due to intensified competition from China, arising from its overcapacity challenges. It expects India, the Philippines, Korea and Australia to decouple from the Fed in 2025 with sharper rate cuts, but at the other end of the spectrum, it sees rate hikes in Japan and Malaysia.
Trumponomics
It said the 2025 forecasting exercise is more challenging than usual, given the many uncertainties surrounding Trumponomics.
“We expect Trump to use his presidential authority to strike fast and hard on imposing tariffs. We also expect Trump will successfully renew the vast majority of the tax cuts from his first term that are set to expire at the end of 2025, though he probably will not be able to meaningfully lower taxes further.
In contrast, on deportations, we believe Trump will underdeliver on his campaign promises, given all the logistical and social challenges,” Despite pledges from Trump advisors, the brokerage do not expect much headway in reducing the large US fiscal deficit, but sees steady progress on deregulation and an increase in fossil fuel production which, together with subdued global demand, should keep international oil prices low.
Nomura said the US is expected to maintain stronger economic growth compared to other developed markets in 2025, driven by policies of the incoming Trump administration. Anticipated tariffs shortly after Trump takes office could elevate inflation while tempering investment growth. “Economic fundamentals remain strong in the US though, with healthy private sector balance sheets and easy financial conditions.
With progress on lowering inflation likely to stall, we expect the Fed to cut the policy rate just once, in March, and then pause for the rest of the year. That would leave the fed funds rate at a still-elevated 4.25% (upper bound) by end 2025,” it said.
