Conjoncture - 07 May 2018
    View document
    The CFA franc’s stability is a source of concern. The drop-off in oil prices has weakened one of the two CFA franc regions so much that fears of devaluation have emerged again. In the end, the status quo is bound to prevail. With IMF support, several countries have engaged in stabilisation programmes that are beginning to bear fruit. Liquidity indicators are still a far cry from the alert thresholds defined in the CFA monetary agreements, and the financial and inflationary effects of devaluation would be disastrous. Yet to sustain the currency peg, several major challenges lie ahead, not only for the West African Economic and Monetary Union (WAEMU), whose robust growth fuels macroeconomic imbalances, but also for the Central African Economic and Monetary Community (CEMAC), which is now paying a heavy price for its oil dependency.
    In the short term, the main risk for the Indonesian economy is a tightening of US monetary policy, which could place downward pressure on the rupiah. In the medium term, the country risks getting stuck in a “middle income trap”. The first risk is presumably small. Indonesia has consolidated its macroeconomic fundamentals over the past five years, and its external vulnerability has been sharply reduced. The second risk is higher. To transform itself into a high income country, Indonesia must follow South Korea’s growth model by developing its manufacturing sector. Yet the lack of infrastructure and a low-skilled population are hampering its development and its integration in global value chains. After President Widodo took power in 2014, numerous reforms have been launched. His re-election in 2019 would allow Indonesia to continue along this track.
    Conjoncture - 03 April 2018
    View document
    Participants at the Paris Climate Conference COP21 agreed that global warming should be limited to 2°C. This would be the case if carbon concentrations could be stabilised at below 450 parts per million (ppm). However, simulations with climate models show that even at this level the risk of overshooting the 2°C limit is not negligible. From an economic point of view, it would be optimal to take early measures to reduce tail risks. To overcome public reluctance to make small sacrifices now to avoid substantial future damages, climate policies should be appropriately framed.
    None of the legislative proposals to reform the US mortgage market has yet come into force. Most of them start from the same position: although government guarantees are essential in ensuring a liquid and stable mortgage market, the Federal government should not be the sole party exposed to payment default risk, especially as this is transmitted through two agencies, Fannie Mae and Freddie Mac, that are in financial difficulties. In the absence of legislation, the regulator of the two agencies has sketched out the foundations of a reform, by developing a program to transfer “non-extreme” credit risk to the market.
    Conjoncture - 12 March 2018
    View document
    At a given moment during the month of February, the S&P500 was down 10% from its historical high. Using the commonly used definition, this meant it was in correction territory. This was considered by some as a healthy correction whereas others argued it might very well mark the beginning of an era of structurally higher volatility. Econometric research and model-based simulations show that the economic impact of equity market corrections is rather small. The stylised facts however show the key role of the reciprocal influence between equity markets and growth expectations. In this respect, particular attention should be devoted to the evolution of the corporate bond spread.
    Results for 2017 from major Spanish banks have been encouraging. Since 2013, the Spanish banking system has accounted relatively stable revenues, mainly driven by net interest income and net fee and commission income. The active management of non-performing loans and the strengthening of foreign activities have contributed to the recovery of profitability. The Spanish banking system might continue to benefit from its previous efforts to restructure and consolidate. Still, significant disparities between individual banks subsist whereas solvency ratios remain under pressure.

On the Same Theme

Sub-Saharan Africa: why concern is mounting 7/22/2016
The wind has changed in Sub-Saharan Africa. Having been boosted by high commodities prices and strong Chinese demand it can no longer count on these factors for the future. Now in full slowdown mode and with growing macroeconomic imbalances, the region’s growth prospects are once again worrying investors. However, government debt is still relatively moderate on the whole.
Clouds on african debt 3/10/2016
In addition to the economic slowdown in China and the slump in commodity prices, african countries are hit by the tightening in external financing conditions. Situation is manageable in the short term. But the dynamic is worrisome.
Financial inclusion in Sub-Saharan Africa 9/25/2014
Together with the banks, more than 23000 financial service providers (microfinance institutions, mobile phone operators...) have developed innovative solutions to increase the financial inclusion of the poor and low-income population. In spite of this, only 40% of adults have access to basic financial services. In order to allow the greatest number of people to engage more actively in the economy, Sub-Saharan African development partners should continue to support the development of these innovative forms of financial intermediation.
South Africa: Talkin' bout an evolution 3/21/2012
With an average annual growth rate of only 3.4% in 2002-2011, two points less than its peers, South Africa does not create enough jobs. The IMF estimates that it would take annual growth of 6% to 7% to significantly reduce unemployment, but such a rebound seems improbable over the next five years. An inefficient job market and chronic lack of investment are the main factors behind this shortage of growth. For private investment to provide a lasting new source of growth, the government must do more than modernise infrastructure. It must above all clear up the uncertainties caused by political divisions that are undermining the business climate.

ABOUT US Three teams of economists (OECD countries research, emerging economies and country risk, banking economics) make up BNP Paribas Economic Research Department.
This website presents their analyses.
The website contains 1794 articles and 490 videos