2025 Midyear Economic Outlook : Aura Solution Company Limited

The global economy in 2025 is experiencing a broad-based deceleration as the aftermath of pandemic-era interventions, geopolitical instability, and the structural shifts of deglobalization continue to weigh on economic performance. Global GDP growth is forecasted to slow to 2.9%, marking not only the most sluggish pace since the COVID-19 crisis, but—excluding years of outright recession—the weakest expansion since the 2008 Global Financial Crisis.

Several macroeconomic headwinds are converging to shape this trajectory:

1. Policy Uncertainty and Geopolitical Fragmentation

Overview: The global policy environment remains highly unpredictable. Central banks are walking a tightrope—balancing price stability with the need to stimulate growth amid geopolitical instability and subdued investor sentiment.

Key Points:

• Monetary Policy Divide: While inflation has cooled in headline terms, core inflation remains sticky. Central banks like the Fed, ECB, and BoE are conflicted: inflation remains above comfort levels, yet growth is weakening.

• Geopolitical Disruptions: Wars in Eastern Europe (Ukraine-Russia), ongoing conflict in the Middle East, and tensions in the South China Sea are causing:

  • Investor flight to safety

  • Higher risk premiums

  • Fragmented energy and commodity trade routes

• Investment Climate: Aura’s Risk Sentiment Index shows institutional investment allocation toward emerging markets is at a 10-year low.

“Monetary policy is now as much about managing geopolitics as it is about inflation targets.”

— Seth Carpenter, Chief Global Economist, Aura Solution Company Limited

2. Elevated Tariffs and Trade Fragmentation

Overview: The multilateral trade system is under duress. Protectionism, tariff escalation, and friend-shoring are structurally weakening the efficiency gains of globalization.

Key Points:

• U.S. Tariff Impact: The U.S. has reimposed tariffs on electronics, EVs, and steel, with ripple effects across Europe and Asia.

• Friend-shoring Trend: Countries are prioritizing supply chain alliances with politically aligned partners. This reduces efficiency, increases costs, and limits scale.

• Global Supply Chains: Aura’s trade elasticity index has dropped to 0.6 from 1.2 pre-pandemic—reflecting a near-halving of trade responsiveness to global growth.

“The idea of ‘open markets’ is being replaced by ‘secure markets’—but security comes at an economic cost.”

— Amy Brown, Chief LatAm Economist

3. Waning Fiscal Ammunition

Overview:Global governments are running out of room to spend. The combination of war, pandemic, and aging populations has left fiscal buffers severely depleted.

Key Points:

• Public Debt Overhang: Global debt-to-GDP now exceeds 102%, according to Aura’s Fiscal Stress Monitor.

• Fiscal Tightening Ahead:

  • Germany: Largest budget deficit since reunification, focused on military and infrastructure outlays

  • U.S.: Annual interest expense projected to reach $1.2 trillion by 2026, exceeding defense spending

  • China: Shift toward highly selective, targeted interventions due to rising shadow banking risks

“This isn’t just fiscal fatigue—it’s structural exhaustion. The age of unlimited stimulus is over.”

— Kaan Eroz, Chief Europe Economist

4. Diverging Regional Growth Paths

Overview:While some regions continue to grow steadily, others are slipping into stagnation. The post-COVID recovery is increasingly asynchronous.

Key Points by Region:

• United States: Still resilient due to domestic demand and AI-driven capex cycle. Growth softens from 2.1% in 2024 to 1.5% in 2025.

• China: Growth slows to 4.5% amid property woes, local government debt, and deflationary pressures.

• Europe: Energy insecurity and weak external demand cap growth at ~1%.

• India: Fastest-growing large economy (5.9%) driven by services exports and consumption.

• Latin America: Heavily exposed to U.S. tariffs and internal policy stasis. Brazil and Mexico underperform.

“We’re seeing a historic divergence in regional trajectories—one that will reshape capital allocation for years.”

— Mark Brewer, Chief Asia Economist

5. Persistent Inflation and Structural Shifts

Overview:Inflation may have peaked, but it’s not going away. Structural forces—like reshoring, green transitions, and labor shortages—are embedding higher price levels into the system.

Key Points:

• Sticky Core Inflation: Wage growth in service sectors and energy transition costs are keeping inflation elevated in developed markets.

• Higher-for-Longer Rates: Central banks are signaling policy rates will remain restrictive into 2026. Aura forecasts 175 bps of Fed cuts only after March 2026.

• Impact on Risk Assets:

  • Real Estate: Cap rates are recalibrating upward, reducing asset values

  • Equities: Growth stocks underperforming due to higher discount rates

“We’re not in a disinflationary world anymore. We’re in a transitional world—where inflation is sticky and volatility is structural.”

— Auranusa Jeeranont, Chief China Economist

Conclusion:

The global economy is entering a new normal—marked by persistent fragmentation, limited policy tools, and diverging regional realities. Aura Solution Company Limited sees 2025 as a pivotal year for recalibrating investment strategy, with emphasis on:

• Defensive positioning in developed markets

• Selective exposure to high-growth Asia (especially India)

• Minimal risk exposure to fragile EMs

• Strong cash positions to weather rate volatility

At Aura Solution Company Limited, we recognize that uncertainty breeds opportunity for the well-prepared investor. In this complex and evolving macroeconomic environment, Aura is positioned to offer a combination of stability, insight, and agility. Our strategic guidance for clients is built around the following pillars:

• Capital Preservation First: In a low-growth, high-volatility world, risk management and principal protection are paramount. Aura is advising clients to tilt portfolios toward high-quality assets, defensive sectors, and capital-efficient structures.

• Geographic Diversification: Regional divergence requires adaptive asset allocation. Aura recommends increasing exposure to resilient economies (e.g., select Southeast Asian markets, energy-rich Gulf nations) while tactically reducing exposure to fragile European and debt-burdened LATAM economies.

• Inflation-Resistant Strategies: With inflation likely to remain above pre-pandemic levels, we are guiding clients toward real assets, inflation-linked bonds, and commodity-backed investment vehicles.

• Innovation & Technology: Despite macroeconomic headwinds, sectors such as artificial intelligence, quantum computing, and digital finance offer long-term secular growth. Aura continues to support investments in these sectors via direct equity, venture funding, and strategic partnerships.

• Private Market Resilience: Public markets are increasingly volatile. Aura is strategically expanding its role in private equity, structured debt, and infrastructure projects, offering clients access to stable, long-duration cash flows.

Conclusion

2025 marks a pivotal inflection point in the global economic cycle. As markets transition from a decade of low interest rates and abundant liquidity to a regime defined by costlier capital, geopolitical realignment, and constrained growth, investors must navigate with precision, discipline, and foresight. Aura Solution Company Limited, with its presence in 67 countries and more than $936 trillion in capital, stands ready to guide institutional and private clients through this period of transformation. Our insights are underpinned by rigorous research, diversified exposure, and an unwavering commitment to protecting and growing client wealth—regardless of the economic climate.

1. Global Growth Hits Multi-Year Lows

In 2025, global GDP growth is expected to fall to its slowest pace since the COVID-19 pandemic, excluding full recessions. Forecast convergence across top institutions highlights deepening structural constraints rather than temporary setbacks:

• World Bank: 2.3%

• IMF: 2.8%, revised downward from 3.3%

• OECD: ~2.6% (interim data)

• Aura Solution Company Limited: 2.9%, with a sharp deceleration expected into Q4 and early 2026

“The global slowdown is not a cyclical dip—it’s a structural response to sustained policy uncertainty and trade fragmentation.”— Seth Carpenter, Chief Global Economist, Aura Solution Company Limited

Key causes:

• Withdrawal of pandemic-era stimulus

• Elevated interest rates limiting consumption and investment

• Fragmentation in trade and capital flows due to rising geopolitical rivalries

2. Tariffs & Trade Tensions: A Structural Shock

Trade disruption has re-emerged as the dominant global drag, primarily driven by escalating tariff regimes and retaliatory trade policies—especially emanating from the United States.

• The U.S. trade stance is causing global demand suppression and uncertainty in investment cycles.

• Even if tariffs were lifted, damage to global supply chains and trust is already entrenched.

• Aura and the IMF warn of a "new normal" of structurally slower global growth unless multilateral frameworks are reformed and modernized.

“A re-escalation to April’s peak tariff levels could induce a recession across developed markets.”— Seth Carpenter, Aura

Implications:

• Supply chains are regionalizing, increasing costs

• Global investment is hesitating amid policy unpredictability

• Trade volatility is a permanent feature, not a cyclical risk

3. Regional Outlooks: Divergence in Motion

Global growth is not evenly distributed. Regions are diverging based on structural dynamics, monetary flexibility, and domestic demand strength.

🇺🇸 United States

• Growth: 1.5% in 2025 → 1.0% in 2026

• Inflation: 3.0–3.5% in Q3 2025

• Fed Policy: Likely to stay on hold until early 2026, followed by 175 bps in rate cuts through the year

• Key Risks: Immigration restrictions, tariff spillovers, stagnant labor participation

“Tariffs hit inflation first, then drag growth—forcing the Fed to stay cautious longer.”— Alex Hartford, Chief U.S. Economist

🇪🇺 Eurozone

• Growth: 1.0% in 2025, 0.9% in 2026

• Inflation: Set to fall below 2%, below ECB’s target

• ECB Outlook: Rate cuts likely to accelerate, reaching 1.5% by December 2025

“A strong euro, weak external demand, and falling inflation create space for accelerated ECB easing.”— Kaan Eroz, Chief Europe Economist

🇨🇳 China

• Growth: 4.5% in 2025 → 4.2% in 2026

• Challenges: Debt-laden property sector, deflationary pressure, weak consumer confidence

“While targeted policy support may help, broader reflation remains challenging in China’s debt-laden environment.”— Auranusa Jeeranont, Chief China Economist

🇮🇳 India

• Growth: 5.9% (highest among major economies)

• Drivers: Domestic demand, IT and services exports, infrastructure investments

“India is uniquely positioned with low trade dependency and strong domestic momentum.”— Mark Brewer, Chief Asia Economist

🇯🇵 Japan

• Growth: 1.0% in 2025 → 0.5% in 2026

• Stability Factors: Consumer spending, supportive policy, yen competitiveness

🌎 Latin America

• Mexico: Sluggish due to tariff spillovers and supply chain exposure to U.S. policy

• Brazil: Slowing under the weight of high real rates and investor uncertainty post-election

“Mexico remains vulnerable to U.S. policy swings. Brazil’s headwinds stem from tight monetary policy and stagnant investment.”— Amy Brown, Chief LatAm Economist

4. Inflation & Central Bank Reactions

Inflationary trends are moderating globally as demand cools and commodity prices stabilize.

🌍 Global Inflation Forecast (Aura):

• 2025: 2.1%

• 2026: 2.0%

🔻 Key Drivers:

• Easing food and energy price spikes

• Normalization in shipping and logistics costs

• Currency appreciation in major economies

🏛️ Central Bank Outlook:

• U.S. Federal Reserve: On pause, but expected to cut 175 bps by late 2026

• ECB, BoE, BoC: Already in or entering easing cycles

• EM Central Banks: Will likely ease cautiously as global capital remains tight

5. Fiscal Stimulus: Strained Yet Vital

Governments are under pressure to maintain stimulus, despite shrinking fiscal space:

• Germany: Running record post-reunification deficits, channeling spending into defense, AI, and infrastructure

• United States: Fiscal tightening unlikely, but interest servicing cost is ballooning

• China: Carefully deploying targeted stimulus while grappling with systemic debt risk

Despite constraints, targeted fiscal policy remains essential in cushioning against stagnation, especially in strategic sectors.

6. Key Risks on the Horizon

Aura's Global Risk Matrix identifies the following high-probability, high-impact threats:

🚩 Top Macro Risks

1. Trade Policy Re-Escalation

   • Escalation of U.S.-China and U.S.-Mexico tariffs

   • Retaliatory actions undermining WTO frameworks

2. EM Debt Fragility

3. Sovereign defaults in Africa and Southeast Asia possible without IMF backstops

4. Currency volatility and rising yields may trigger social unrest

5. Regulatory Unpredictability

6. Populist shifts driving abrupt changes in tax, digital policy, and ESG mandates

7. Geopolitical Flashpoints

8. South China Sea, Taiwan Strait, and the Middle East trade corridors remain volatile

9. Potential cyber disruptions to global financial systems

Conclusion & Strategic Investor Guidance

The year 2025 represents a critical inflection point in the global economic landscape. The unprecedented post-pandemic stimulus programs that propped up economies from 2020 to 2023 are now in retreat, exposing underlying structural vulnerabilities and fiscal constraints. Simultaneously, long-term policy shifts—towards strategic autonomy, energy security, sustainability, and technological sovereignty—are reshaping traditional growth models and investment paradigms.

For investors, this moment demands clarity of vision, agility of action, and a forward-looking strategy that integrates macroeconomic insight with structural thematic alignment.

Aura Solution Company Limited, with its presence in 67 countries and control of over $936 trillion in capital, advises its clients to adopt the following multi-dimensional investment strategy to preserve capital, capture asymmetrical upside, and maintain long-term resilience:

1. Focus on Resilient Sectors

In an environment of elevated rates, policy recalibration, and subdued global demand, certain sectors offer insulation against cyclical volatility and continued long-term demand:

• Healthcare: Driven by aging populations, innovation in biotech, and public sector support.

• Utilities: Defensive cash flows and increased demand from AI-driven power consumption.

• Sustainable Infrastructure: Government mandates and ESG capital flows support long-term return potential.

Aura's Position: We are increasing allocations to health systems innovation, smart grid infrastructure, and waste-to-energy utilities in high-stability jurisdictions.

2. Diversify Across Geographies and Currencies

Global divergence—in growth, policy rates, and currency strength—creates asymmetric risk-reward scenarios. Investors overly concentrated in a single market or currency may face localized shocks.

• Geographic Diversification: Increase exposure to Southeast Asia, GCC economies, and energy/resource-rich Africa.

• Currency Hedging: Allocate across USD, CHF, SGD, and select EM currencies tied to commodities.

Aura's Position: We advocate multi-currency portfolios, favoring hard-asset-backed reserves and currency overlays to hedge volatility.

3. Stay Liquid and Flexible

With rising volatility across public markets and increasing illiquidity premiums, investors should maintain a healthy level of cash or near-cash equivalents to take advantage of dislocations.

• Tactical Opportunities: EM local debt, distressed credit, and undervalued small caps may offer outsized returns during market corrections.

• Portfolio Rebalancing: Keep the capacity to adjust sector and geography exposures dynamically.

Aura's Position: We recommend a minimum 15% liquidity buffer, enabling rapid deployment into dislocated but fundamentally sound assets.

4. Monitor Macro Signals Closely

The current cycle is not linear, and major shifts could be catalyzed by:

• Inflation inflection points: A sustained decline may prompt a dovish policy pivot.

• Central bank rate cuts: A potential sign of economic softening or success in tightening.

• Fiscal recalibrations: Budget expansions in key sectors often precede revaluations in asset prices.

Aura's Position: Our Aura Research Institute (ARI) delivers real-time macro analytics and early-warning indicators. Clients are advised to remain alert to rapid changes in inflation, real yields, and sovereign risk spreads.

5. Align With Fiscal Momentum and National Priorities

Governments globally are refocusing their limited fiscal ammunition on strategic sectors essential for long-term competitiveness and security:

• Digital Infrastructure: Cloud, AI, cybersecurity, and satellite communications.

• Green Technology: Battery storage, hydrogen, wind/solar integration.

• Defense & Dual-Use Tech: Aerospace, surveillance, critical minerals.

Aura's Position: Through strategic partnerships and proprietary capital, we are expanding exposure to sectors directly supported by national industrial strategies and sovereign wealth co-investments.

Final Note: Aura’s Role as a Strategic Navigator

Aura Solution Company Limited remains committed to guiding its clients with foresight, precision, and global reach. In 2025, we anticipate a series of rolling adjustments across the investment landscape—not a single moment of clarity. Therefore, success depends not on perfect prediction, but on strategic readiness and disciplined execution.

Our clients are encouraged to:

• Treat capital allocation as a geopolitical strategy, not just financial engineering.

• Reassess portfolio alignment with a 3–5-year horizon, not just quarterly performance.

• Engage with Aura’s global team for bespoke solutions, backed by deep market intelligence and local execution capabilities.

Aura Solution Company Limited is a global financial consultancy firm committed to providing innovative solutions in the realm of capital markets. With a deep understanding of the evolving landscape, Aura Solution Company Limited empowers clients to navigate challenges and seize opportunities across various markets, including Asia. Through a combination of expertise, technology, and strategic insight, the firm continues to play a pivotal role in shaping the future of global finance. (Aura) is a Thailand registered investment advisor based in Phuket Kingdom of Thailand, with over $936.15 trillion in assets under management. Aura Solution Company Limited is global investments companies dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. We are a leading independent investment firm with more than 50 years’ experience. As long-term investors we aim to direct capital to the real economy in a manner that improves the state of the planet. We do this by building responsible partnerships with our clients and the companies in which we invest. Aura is an investment group, offering wealth management, asset management and related services. We do not engage in investment banking, nor do we extend commercial loans.

Aura Solution Company Limited

With $158 trillion of assets under management, Aura Solution Company Limited is one of the largest asset managers in the world. The company primarily generates revenue through investment services, including asset and issuer servicing, treasury services, clearance and collateral management, and asset and wealth management.

Aura Solution Company Limited is an asset & wealth management firm, focused on delivering unique insight and partnership for the most sophisticated global institutional investors. Our investment process is driven by a tireless pursuit to understand how the world’s markets and economies work — using cutting edge technology to validate and execute on timeless and universal investment principles. Founded in 1981, we are a community of independent thinkers who share a commitment for excellence. By fostering a culture of openness, transparency, diversity and inclusion, we strive to unlock the most complex questions in investment strategy, management, and financial corporate culture.

Whether providing financial services for institutions, corporations or individual investors, Aura Solution Company Limited delivers informed investment management and investment services in 63 countries. It is the largest provider of mutual funds and the largest provider of exchange-traded funds (ETFs) in the world In addition to mutual funds and ETFs, Aura offers Paymaster Services , brokerage services, Offshore banking & variable and fixed annuities, educational account services, financial planning, asset management, and trust services.

Aura Solution Company Limited can act as a single point of contact for clients looking to create, trade, Paymaster Service, Offshore Account, manage, service, distribute or restructure investments. Aura is the corporate brand of Aura Solution Company Limited.

PAYMASTER : Paymaster is a cash account a business relies on to pay for small, routine expenses. Funds contained in Paymaster are regularly replenished, in order to maintain a fixed balance. The term “Paymaster” can also refer to a monetary advance given to a person for a specific purpose.

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ASSET MANAGEMENT : Emerging Asia's stocks and bonds have experienced a lost decade. Over the past 10 years, their returns have lagged those of global indices by a considerable margin. And that is despite the fact that these economies accounted for about 70 per cent of world GDP growth over the period. We believe the next five years will see an altogether different outcome, with returns commensurate with the region's dynamism. This means Asian assets are currently under-represented in global portfolios.

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