Based in Paris, BNP Paribas' Economic Research Department is composed of economists and statisticians:
The Economic Research department’s mission is to cater to the economic research needs of the clients, business lines and functions of BNP Paribas. Our team of economists and statisticians covers a large number of advanced, developing and emerging countries, the real economy, financial markets and banking. As we foster the sharing of our research output with anyone who is interested in the economic situation or who needs insight into specific economic issues, this website presents our analysis, videos and podcasts.
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On the global oil market, we currently have a slightly dynamic demand. China's oil demand in particular which represents around 15% of the global oil demand.
In the main emerging economies, the pace of disinflation is slowing and the cycle of monetary easing began more than a year ago. Egypt is an exception to this trend, due to a severe balance-of-payments crisis that affected its economy until early 2024. Inflation only began to moderate in Q2 2024, and the Central Bank of Egypt decided to leave its key rates unchanged at its Monetary Policy Committee meeting on 17 October 2024.
Energy and mineral commodities are central to the low carbon transition process. Latin America, which boasts abundant amounts of minerals and key metals for the transition, and GCC[1] countries, which are dependent on revenue from hydrocarbons, are seemingly, on the face of it, taking contrasting paths on the transition journey. However, the macroeconomic consequences cannot easily be determined currently. Gulf countries have some advantages in the oil market, but the pace of the transition could affect revenues more quickly than expected. In Latin America, while the size of critical minerals reserves is brightening the outlook, various national strategies and numerous constraints could curb the scale
The economy of the United Arab Emirates (UAE) is still one of the most dynamic in the region. The strong performances are due to the UAE's sectoral diversification and the attractiveness of Dubai to tourists and investors. Despite the tense geopolitical environment, the short-term outlook is bright, as hydrocarbon production is expected to increase and the steady growth in services and real estate is expected to continue. However, geopolitical risk, oil market uncertainties and US monetary policy are all factors that could threaten this outlook. Uncertainty about the pace and scope of the low-carbon transition is making the longer-term outlook much more uncertain
In Saudi Arabia, the decline in oil production is weighing on economic growth, but non-oil activity is buoyant thanks to massive investment programs. In the short term, tight labour market and rising geopolitical risk could constrain the rebound in activity. In the medium term, the kingdom's financial strength should allow the economy to continue to diversify.
Despite their many vulnerabilities, including a high dependency on the European market and a complex political environment, the economies of the Western Balkans have held up remarkably well against two external shocks since 2022: the war in Ukraine and Europe’s economic slowdown. The foreign exchange risk has been contained thanks to the support of foreign direct investment and external financing. Buoyant domestic demand has helped to offset the effects of the slowdown in Europe on exports. Inflationary pressures, which were still substantial in 2023, are expected to ease this year. In Croatia, macroeconomic risks will be reduced significantly thanks to the eurozone accession. However, its high dependency on tourism activity is still a factor of vulnerability
Against a backdrop of rising regional geopolitical pressures, the economic crisis is deepening further in Egypt and now poses a threat to public finances. With no agreement reached with the IMF, the balance of payments crisis is continuing to unfold, and the adjustments needed are being postponed. As a result of the exchange rate depreciating and interest rates rocketing, this crisis has pushed the interest burden on government debt to a level that could quickly become unsustainable. As a matter of fact, it could hit 70% of government revenue this year and remain very high next year
BNP Paribas Economic Research wishes you all the best for 2024. On the macroeconomic front, the highlight of 2023 was the peak in official rates in the United States and the eurozone, but what is in store for 2024?In this video, you can discover the topics and points of attention that will be monitored throughout 2024 for each team: Banking Economy, OECD and Country Risk.
Egypt’s management of external accounts, which consists of buying time thanks to external support between two drastic exchange rate readjustments, is reaching its limits. The persistence of a significant external financing need, notably due to the amortisation of external debt, and international creditors (Gulf States and the IMF) who condition their support on painful and politically costly reforms, have led the Egyptian economy to a dead end. The banks’ net external position is deteriorating at an alarming rate. Restrictions on foreign currency transactions are increasing, with negative consequences on activity in a country highly dependent on imports
The current period is very favourable for the Saudi economy due to high oil revenues and implementation of extensive reform and investment programmes. Nevertheless, despite real progress in diversification, activity remains vulnerable to oil market vagaries and OPEC production policy. A moderate upturn in activity is expected in 2024 after a slight recession this year. Oil revenues remain decisive for maintaining budgetary balance and implementing Vision 2030 investments. However, the scale of funding requirements and the lack of attractiveness of the Kingdom to foreign investors mean massive use of debt as well as the sale of public assets
For about a decade now, the exploitation of new natural gas reserves in the Eastern Mediterranean has had significant economic consequences for producing countries, and has been upgrading the region’s position on the international gas market. Egypt still dominates the sector, with significant reserves and export infrastructure, but Israeli production is increasingly impacting the region’s exports. 2022 was a very favourable year for the sector due to rising prices and European demand. Despite the current decline in prices on the European market, this trend should continue in the coming years
Egypt is heavily exposed to the consequences of global warming due to its Mediterranean geographical location, high population growth and the importance of the agricultural sector. Already deemed critical, water stress is likely to increase in the medium and long term. The deteriorating trend of various vulnerability and resilience indicators, currently at medium levels, is increasing climate risk in the long term. The financial resources of the Egyptian government are extremely constrained, given the deteriorating macroeconomic situation and the unfavourable outlook. Transformation of the energy mix may be partially funded by private capital. However, funding for climate change reduction and adaptation policies, by definition less profitable in the short term, remains problematic.
Oil production feeds growth volatility in Saudi Arabia, as evidenced by the slowdown expected this year. Nevertheless, the non-oil economy is benefiting from the momentum of investment and household consumption against a backdrop of gradual transformation of the economy and the labour market. State intervention and a favourable exchange rate effect are keeping inflation at moderate levels. Against this favourable economic backdrop, bank lending to the private sector is very dynamic, creating some strain on bank liquidity. The budget surplus posted in 2022 is not likely to be repeated this year due to the expected downturn in oil production and prices. However, public finances are on a positive trajectory thanks to the increase in non-oil revenues.
The crisis is taking hold in Egypt, as evidenced by the deterioration in all macroeconomic indicators. Activity is slowing down against a backdrop of high inflation, caused in particular by the depreciation of the exchange rate. The balance of payments crisis has been endemic for a year, and the international support plan initiated by the IMF has not allowed any reduction in tensions regarding foreign currency liquidity. Despite the sharp rise in nominal rates on government securities, international investors remain cautious due to the very high level of inflation and expectations of currency depreciation. The external financing requirement will remain high for at least two years, with the privatisation programme only providing partial relief
In Egypt, all macroeconomic indicators are deteriorating. In 2023, economic growth should slow down and CPI inflation reach a high level. Contrary to the other emerging economies, inflation is expected to accelerate in 2023 -notably given the depreciation of the pound- by around 50% for a year.
The Gulf countries (GCC) – Saudi Arabia, Bahrain, United Arab Emirates, Kuwait, Oman and Qatar – are experiencing an economic boom. The discipline of the cartel of oil-producing countries and international geopolitical tensions are keeping oil and gas prices high and feed into the fiscal and external accounts of countries still highly dependent on oil revenues. Contrary to previous periods of economic upturn, it seems that most governments are maintaining a degree of fiscal discipline, which, over the medium term, should reduce vulnerability to variations in oil revenues. In the longer term, climate change and the associated energy transition pose an existential challenge for these hydrocarbon-based economies
Israeli economic performance was particularly strong in 2022 and remained above OECD average. Growth was very buoyant thanks to the dynamism of consumption and investment, while the fiscal year should end with a surplus. Although relatively moderate, inflation accelerated during 2022 and forced the Central Bank to tighten significantly its monetary policy. Against this backdrop, which is not favourable to consumption and investment, activity should slow this year. The continued depreciation of the shekel was an additional inflationary factor. The fall in the exchange rate against the USD reflects the general strengthening of the dollar, but also Israeli investors' management of their assets in dollars. External accounts remain solid, thanks to strong competitiveness in some key sectors
On 1 January 2023, Croatia became the eurozone’s twentieth member. By reducing foreign exchange risk, euro adoption significantly improves the country’s macroeconomic solidity.
Egyptian external accounts have been under pressure since the beginning of the year and the outlook is uncertain. Although the current account was able to withstand external shocks thanks to the rise in gas revenues, only the massive support of the Gulf countries enabled Egypt to cope with portfolio investment outflows and to avoid a foreign exchange crisis. The dynamic remains negative in the short term, given the drop in net foreign currency assets in the banking system and persistent exchange rate pressures, despite depreciation of more than 20% since the beginning of the year
The Qatari economy, which is poorly diversified and based on long-term gas export contracts, has not experienced the same volatility as elsewhere in the Gulf during the last five years. In the short term, high oil prices and the forthcoming World Cup will support growth and enable a return to substantial external and budgetary surpluses. Likewise, the reduction in banks’ external liabilities should continue. Inflation will remain relatively moderate thanks to government intervention and the impact of the stronger dollar on import prices. In the medium term, the macroeconomic outlook is very positive as a result of the significant increase in gas revenues. However, it is less certain in the longer term, in the context of the energy transition
The economic recovery should be sustained in 2022 due to the sharp increase in hydrocarbon production following the OPEC+ agreements and due to stronger growth in household consumption. The current oil trend is favourable to public finances, while the process of fiscal consolidation and revenue diversification is expected to continue. It has already led to a significant reduction in the fiscal breakeven oil price and therefore less exposure to oil market volatility. In the meantime, tensions have emerged on the interbank market and have required an injection of liquidity by the central bank
Currency liquidity in Egypt continues to deteriorate at a rapid pace. The banking sector’s net foreign assets (commercial banks and the central bank) are deeply negative (USD -16.6 billion in May 2022) and significantly exceed the lowest level reached during the 2016 crisis (USD -13.8 billion in October 2016). This deterioration comes as no surprise and the effects of the war in Ukraine on commodity prices have only exacerbated a pre-existing trend. Given a large recurring current account deficit (at least USD 20 billion this year) and significant external debt repayments (around USD 9 billion over a whole year), the Egyptian economy relies heavily on volatile portfolio investments
The impact on Serbia’s economy caused by the war in Ukraine is likely to remain moderate. However, the war will adversely affect all macroeconomic indicators. Growth forecasts have been downgraded because of sharply higher inflation, trade exposure to Russia and a weaker European economy. Serbia’s central bank has carried out only moderate monetary tightening so far, expecting that the jump in inflation will be short-lived. External accounts are likely to deteriorate because of the wider current account deficit and a possible slowdown in foreign direct investment flows, but the central bank should still be able to defend the dinar stability. This is crucial for Serbia’s macroeconomic stability given that commercial bank balance sheets and government debt are highly exposed to the euro
Egypt’s economic prospects have worsened with the outbreak of war in Ukraine and its consequences for commodity prices. The widespread increase in prices will result in a significant drop in consumer purchasing power and will thus stall the main engine of economic activity. The erosion of foreign currency liquidity has accelerated over the last month, with massive outflows of capital and an expected widening of the current account deficit due to the difficulty in reducing imports, a drop in tourist frequentation and the limited effect on exports of the Egyptian pound’s depreciation. This highlights the continued vulnerability of the economy to external shocks and its reliance on external support
Despite a significant improvement in macroeconomic indicators over the past five years, foreign currency liquidity remains a major source of vulnerability for the Egyptian economy. The net foreign asset position of commercial banks has steadily deteriorated over the past year and was in deficit by USD10 billion in December 2021, by far its lowest level for a decade. Meanwhile, gross currency reserves at the central bank grew only very slightly over the year. This deterioration of the external position of the banking system as a whole reflects that of the external accounts. The current account deficit is increasing following a sharp rise in imports
