[How About This Book] 2025 Energy Storage Revolution, AI Illuminates the Path Ahead

Economist's Political, Economic, and Business Outlook for Next Year
80GW of Additional Energy Storage Devices Worldwide Next Year
China Likely to Struggle Making Good Chips Due to US Export Restrictions

The British economic magazine The Economist publishes an annual book titled "The World in..." that provides in-depth analysis of the politics, economy, business, finance, science, and culture of countries around the world to predict the future and analyze trends.

In the business section of "The World in 2025," The Economist first mentions the energy storage revolution. The Economist's diagnosis is that "the golden age of grid-scale energy storage is imminent."

The scale of newly added energy storage systems (ESS) worldwide next year is estimated to reach 80GW. This is an eightfold increase in just four years compared to 2021. The Economist cites four reasons for the energy storage revolution: the rapid increase in solar and wind power generation, which require storage devices; the sharp drop in lithium-ion battery prices due to China's overproduction; the surge in electricity demand driven by the rise of artificial intelligence (AI); and finally, the most important innovative alternatives for energy storage. Examples of innovative alternatives include sodium-ion batteries, which significantly reduce fire risks, hybrid systems using water and lithium batteries, and compressed gas.

Energy storage systems are a variable that can gauge the direction of the emerging AI market. The Economist expects Nvidia's Blackwell chip to enter full production next year and become the core of data centers. However, it also warns that the production of energy storage systems or data centers may not keep up with the explosive demand for Blackwell chips, potentially causing bottlenecks. Above all, the AI chip technology itself could be a variable. The question is whether chip manufacturers can develop the large and high-performance AI chips that the market expects.

In China's case, it is expected to be difficult to produce high-performance chips due to U.S. export restrictions. Moreover, these export restrictions imposed by the U.S. are likely to be strengthened. This is because Donald Trump, who triggered an extreme trade war with China during his first term, is returning to the White House. Trump is expected to tighten export restrictions on China and squeeze it with large-scale tariffs. The biggest topic across global politics and economics next year will be Trump's return, and The Economist extensively analyzes in "The World in 2025" how Trump's return will affect the current world order.

Trump's momentum is expected to soar as the Republican Party has secured a majority in both the House and Senate. Idris Kalun, The Economist's Washington bureau chief, likened Trump's situation to a "trifecta," a horse racing term meaning correctly predicting the first, second, and third place horses.

Furthermore, the U.S. economy is expected to perform well next year. The recent unemployment rate in the U.S. is as low as about 4%, and inflation is expected to stabilize at the Federal Reserve's annual target of 2% in 2025. This is because supply chains damaged by the COVID-19 pandemic will be fully restored, and the labor market will return to normal, easing price pressures. The Economist predicts that by the end of 2025, the U.S. benchmark interest rate will fall below 4%. It forecasts a soft landing for the U.S. economy in 2025, attributing this to current President Joe Biden's achievements, though Trump is expected to claim credit for it.

Trump's key pledges include deregulation, tax cuts, tariff increases, and deportation of illegal immigrants. The Economist warns that tariff increases and deportation of illegal immigrants could be negative factors for the U.S. economy. They could raise import prices, reduce the labor force, burden economic growth, and stimulate inflation. Additionally, The Economist expects that Trump's large-scale tax cuts will expand the federal budget deficit, projecting the deficit ratio to reach 6% of GDP next year.

The Russia-Ukraine war, now entering its fourth year, is likely to end soon because Trump is not expected to allocate budget for Ukraine support. Consequently, significant changes are expected in the European political landscape. The Economist's defense editor, Sashank Joshi, wrote, "Trump's return to the White House will be a major shock to Europe."

If Trump's America tries to withdraw from the war, Europe faces two choices: compromise with Russia or significantly increase defense and security spending to support Ukraine. This could either unite or divide Europe, but financially, division seems more likely. Among NATO's 30 European member countries, only about two-thirds currently spend 2% of GDP on defense. If the U.S. withdraws, defense spending may need to more than double. This implies increased debt, tax hikes, and welfare spending cuts, increasing political burdens on government officials. If the West compromises with Russia, Ukraine is likely to lose the Crimean Peninsula and the Donbas region.

Germany's early general election in February is another variable not to be overlooked. The Economist expects Friedrich Merz, who is likely to become the new German Chancellor, to be more conservative than former Chancellor Angela Merkel. To counter the far-right party Alternative for Germany (AfD), he is expected to take a tough stance on illegal immigration issues.

The World in 2025 | Written by The Economist | Translated by Lee Go-woon, Lee Yoo-jung, Jeon Ye-jin | Hankyung | 416 pages | 23,000 KRW

This content was produced with the assistance of AI translation services.