Before the outbreak of war in the Middle East in late February, our 2026 forecasts for the major advanced economies pointed to higher growth and lower inflation. However, this new conflict in the Persian Gulf is a game-changer. The resulting energy shock is of a stagflationary nature: growth forecasts are being revised downward and inflation forecasts upward, with variations observed across different countries. Most of the supportive factors that were present in 2025 are expected to remain in place in 2026, providing some buffer against the shock. Under the central scenario of the conflict losing intensity by the end of the second quarter, growth forecasts for 2026 are lowered by 0
US growth remains robust, exhibiting strong momentum, but is still reliant on a narrow base – AI on the activity side and healthcare for jobs. The energy shock presents a new challenge, and its impact will depend on both the duration and severity of the Iran war. In any case, this situation is likely to drive inflation further above the target. Our baseline scenario projects 2.4% annual GDP growth in 2026 (down 0.3pp vs. the pre-conflict outlook) and 2.5% in 2027 (+0.3pp). Inflation is expected to reach 3.2% y/y in 2026. Against this backdrop, we expect the Fed to adopt a two-sided stance, with balanced risks around the Fed Funds rate and a hold as the baseline scenario
According to our forecasts, the impact of the conflict in the Middle East is likely to restrict GDP growth to 1.0% in 2026 and 1.3% in 2027 (down from 1.6% for both years prior to the conflict). Private consumption will be hit by falling real wages (with inflation projected at 3.0% in 2026 and 3.3% in 2027, compared to initial estimates of 1.9% and 2.3%). However, the high savings rate will enable households to mitigate the impact over time. Economic activity could suffer from less favourable interest rate dynamics (we anticipate a 50bp increase in ECB rates in 2026). However, the ongoing investment in defence, AI and electrification is expected to continue and boost intra-EU trade. The expected deterioration in public finances in 2026 will be significantly less severe than in 2022.
After two years of recession, German growth began to recover in 2025. We expect it to strengthen in 2026, driven by the ramp-up of investment plans. We are, however, revising our forecasts downwards, as the German economy remains vulnerable to the current shock to energy prices (+0.8% in 2026 [-0.6pp] and +1.1% in 2027 [-0.4pp]). This will weigh on private consumption due to the impact of rising inflation (3.2% in 2026 [+1.6pp] et +3.5% in 2027 [+1.2pp]) on the purchasing power of wages. The fiscal trajectory, meanwhile, is expected to remain broadly unchanged. Public debt is set to continue rising towards 70% of GDP by 2030, which, in the current context, would maintain upward pressure on long-term interest rates.
Since rebounding in Q2 2025, French growth has been relatively robust. Things are not expected to have changed in Q1 2026, with growth supported in particular by precautionary spending. In Q2, higher inflation (and thus lower purchasing power) should weigh on household consumption, whilst support from public finances is expected to be more moderate than in 2022. However, French growth is expected to remain resilient, driven in particular by public investment (both French and European) in defence and private investment in AI. Overall, we are revising our growth forecasts to 1% in 2026 (-0.3 pp) and 1.1% in 2027 (-0.2 pp); and our inflation forecasts to 2.4% in 2026 (+1.3 pp) and 1.9% in 2027 (+0.4 pp)
Italy entered 2026 with moderate momentum, posting a real GDP growth of +0.3% q/q in Q4 2025. However, the economy faces increasing risks due to its reliance on LNG and its exposure to the Strait of Hormuz. Consequently, growth is projected to be around +0.7% in 2026 (-0.3 pp), accompanied by weaker investment, consumption and exports. Inflationary pressures are also mounting, as are energy costs for businesses. Despite these challenges, foreign trade remains adaptable. Fiscal consolidation is progressing, although fiscal capacity remains limited.
The Spanish economy is in a favourable long-term cycle, characterised by strong growth, underpinned by domestic demand. In 2026, outperformance relative to the Eurozone is expected to continue, but growth is projected to decelerate due to the weakening of its structural foundations (available labour), a lack of momentum (low productivity) and the inflationary shock. It is projected to reach 2.3% in 2026 (revised downwards by 0.2pp). Inflation is expected to rise to 3.3% (revised upwards by 1pp), which will impact household purchasing power. However, public finances are expected to have the capacity to mitigate this impact without jeopardising the trajectory of public debt ratio reduction.
Following a strong performance in 2025, the UK economy will suffer in 2026 as a result of its dependence on imported commodities, with little fiscal headroom to address the situation. GDP growth is expected to fall to 0.7%. Inflation is expected to remain persistently above the Bank of England’s (BoE) 2% target, standing at 3.6% in 2026 and 3.3% in 2027 (though this forecast will depend on the scale and duration of the conflict). However, demand is significantly less robust than in 2022, which should limit second-round effects. Nevertheless, the BoE is expected to respond. According to our forecasts, it will raise its key interest rate by 25 basis points in Q2 and then in Q3; it is expected to lower it again in 2027
The improved health of the Japanese economy is evident. Consumer confidence and the Tankan business-conditions index hit post-COVID highs before the energy shock began. The shock, however, is expected to weigh on growth, which is projected at 0.5% in 2026 (revised -0.3pp). Inflation, at 2.7% in 2026 (revised up 0.7pp), is set to remain the BoJ. The two pillars of the policy mix could remain at odds in light of the new energy shock, with the government favouring an expansionary fiscal stance while the central bank is expected to keep raising its policy rate, projected to reach 2% by end-2027.
A series of six charts showing key economic indicators (GDP, inflation, unemployment, current account balance, budget balance, public debt ratio) and comparing the situations of the major advanced economies.
Contributions of the various components of demand to quarterly growth (quarter-on-quarter, non-annualized).
Economic and financial forecasts for major economies as of April 2026.
This issue was completed on February 27, 2026 and does not take into account the repercussions of the military attacks that have since occurred in the Middle East. Emerging countries with strategic resources, such as critical metals and semiconductor production capacities, have become key players in the rise of artificial intelligence (AI). Those that are well positioned in AI supply chains have both a growth engine and a major geopolitical advantage. Asia's industrialised economies, which account for over 85% of the world's exports of electronic chips, are best placed to benefit from the increasing demand for AI. However, this advantage also exposes them to a potential correction in the technology boom
The development of artificial intelligence (AI) depends largely on the availability of abundant and reliable electricity. The sector currently accounts for 4.5% of electricity demand in the United States, 2% in Europe and around 1% in Asia (including China), where the vast majority of data centres are located. In contrast, this figure is less than 0.5% in the rest of the world, but is set to increase in the coming years. To attract investment in the AI sector, emerging countries must therefore consider significantly increasing their electricity generation capacity and establishing networks capable of continuously powering data centres. Massive investments in infrastructure, along with the use of flexible energy sources (gas, renewables), are assets for attracting AI projects
Central Europe: Economic growth accelerated slightly to 2.3% for 2025 as a whole - Asia: In 2025, economic growth weathered the rise in US tariffs much better than expected - North Africa/Middle East: The economies of saw a rebound in growth in 2025 - Sub-Saharan Africa: The economic outlook for the region has been positively adjusted in recent months - Latin American: In 2025 these countries experienced slower growth
Key indicators for emerging countries: Real GDP, inflation, credit, public debt.
China's economic growth model is based on imbalances, characterised by sluggish domestic demand, excess production capacities, strong exports and the pursuit of self-sufficiency, which have implications for its trading partners. While the IMF has recently reiterated the urgent need to boost private consumption, Beijing continues to give the priority to industrial policy and maintains moderately accommodative fiscal and monetary policies. It places cutting-edge sectors, innovation, AI and technological autonomy at the heart of its development strategy. This strategy aims to foster productivity gains and economic growth, while also consolidating China's dominance in global industry and its commitment to "national security".
India’s economic growth is projected to be +7.6% for FY 2025/26, ranking among the highest in Asia. Monetary easing and VAT cuts have bolstered domestic demand. The medium-term outlook remains favourable. The reduction in US tariffs and the gradual rollout of new free trade agreements (FTAs)—including with the US, EU, UK and EFTA—should bolster exports. After decades of protectionism, India is opening up its economy to attract FDI, develop industry, and create high-quality jobs. The government acknowledges the risks that AI poses to employment in the IT services sector.
Malaysia’s economic growth continues to be robust and is projected to remain resilient over the next two years, underpinned by vigorous domestic demand and sustained global consumption of electronic goods. Unlike other ASEAN economies, however, Malaysia has derived little benefit from the decline in Chinese exports to the US market. Moreover, its imports of Chinese products have risen sharply, putting pressure on the manufacturing sector. Like its regional peers, Malaysia is actively expanding its trade and financial partnerships to diversify its exports and attract investment—critical steps to ascending the value chain in artificial intelligence (AI) components.
All eyes are on the general elections on 12 April which will encapsulate the key issues facing Hungary. Regardless of the outcome of the election, Hungary’s economic growth is expected to recover in 2026 and 2027, driven by more favourable export and consumption prospects. One cloud on the horizon, however, is the continued uncertainty around the trajectory of investment, as it hinges on European funds being released. Inflation is expected to remain within its target range in the short term, paving the way for a cycle of moderate monetary easing. Artificial intelligence is a promising sector and will play an important role in the coming years.
Poland's economy is impressively dynamic. In 2025, the country posted the highest growth rate in Central Europe and one of the highest in the European Union. This growth pattern should, yet again, be observed in 2026. Inflation is projected to remain within its target range in 2026 and 2027. However, the cycle of monetary easing is coming to an end. Public finances have deteriorated, but the Polish government can still easily secure financing on the bond market, and sovereign risk remains limited. The artificial intelligence sector, while still in its infancy, is set to become a key driver of growth.
The Turkish economy has experienced a moderate deceleration despite a flat labour market since 2024 and a reduction in exports in the second half of 2025. Concerns linked to political tensions in March 2025 have dissipated. Consumption is slowing but remains buoyant thanks to renewed disinflation and the use of credit. Investment has recovered after a slump in 2024. Growth is expected to strengthen slightly in 2026, in contrast to the previously expected slowdown scenario. Consumption is expected to moderate further, influenced by tighter controls on credit card use. However, monetary policy is likely to remain accommodative, and fiscal policy will also adopt a more supportive stance. The overvaluation of the lira continues to be the main risk to growth
The Argentine economy has avoided recession due to strong exports. Fiscal policy is restrictive and will remain so, while inflation has picked up again in recent months. Growth is expected to slow in 2026 before rebounding in 2027. Empowered by his party's gains in the October 2025 mid-term elections, President Milei aims to push through his structural reforms swiftly. With backing from the IMF, the US Treasury and major international banks, foreign exchange reserves have been replenished, and the risk premium has fallen significantly. However, reserves remain low in view of the dollar-denominated debt servicing obligations for the next two years. Although the AI sector has yet to make a significant impact on growth, it is contributing to the development of the mining industry
The Brazilian economy is navigating between two currents: on the one hand, signs of a cyclical slowdown are mounting under the effects of monetary tightening; on the other hand, rebalancing mechanisms are emerging: disinflation is ongoing, interest rates cuts are in sight, the labour market is adjusting gradually to a more sustainable equilibrium, and economic growth is moving closer to its long-term potential. The current account deficit is resisting rebalancing, though it stays comfortably covered by steady inflows of foreign capital. The country's positioning in AI value chains reflects its comparative advantages: abundant natural and energy resources and a vibrant startup ecosystem
Chile’s economic growth will slow very slightly in 2026 but will remain close to its potential, while inflation will fluctuate around the 3% target. The mining sector continues to be an important driver of growth: high copper and lithium prices are bolstering exports and investment projects. The pace of fiscal consolidation and the investment outlook will largely depend on the new government's ability to implement the economic measures announced during the presidential campaign. Despite the proliferation of initiatives aimed at developing the AI sector, its contribution to growth remains low. Mining resources are an asset and projects are multiplying, but environmental and social constraints will have to be addressed.
EcoPerspectives is the quarterly review of advanced economies (member countries of the Organisation for Economic Co-operation and Development) and China.
It provides an outline of several advanced economies using indicators for the past quarter and it looks ahead in order to better understand and anticipate the main economic problems of the countries in question.
For EcoPerspectives, economists from the advanced economies team regularly monitor the key economic indicators of selected countries. In particular, our experts use the quarterly forecasts provided by BNP Paribas (for growth, inflation, exchange rates, interest rates and oil prices). Each economist analyses the economic situation of one or more countries, based on the available indicators, in order to see how they change, including the industrial production index, quarterly gross domestic product (GDP) and inflation forecasts, the consumer price index (CPI) and the producer price index (PPI), and employment and unemployment figures. How various stakeholders’ views evolve is also studied and analysed closely (e.g. household confidence and business climate). The author comments on the main factors that influence and determine the economic activity of the country concerned and the economic outlook for the coming quarter.
