Growth in emerging economies has remained solid since the beginning of the year, thanks in particular to buoyant exports and easing financial conditions. Up until the summer, the front-loading of purchases in anticipation of tariff increases in the United States stimulated trade. In addition, global trade flows have been reorganised. In 2026, fiscal and monetary policies will continue to support growth, but will be more constrained. Monetary easing will be less pronounced than in 2025, if only because of the uneven pace of disinflation across countries. Fiscal policy will be constrained by the need to curb the growth of public debt ratios
Central Europe: resilience | Asia: Exports remain buoyant | North Africa/Middle East: Cautious optimism | Latin America: Little impact from the US tariff shock, but fragile public finances
Key indicators for major emerging countries and their public debt and vulnerability to external financial conditions.
After a solid start to the year, Chinese economic growth has gradually slowed. Thanks to a rapid reorientation, exports have weathered the US tariff shock well. They are the main driver of economic activity, while domestic demand remains stubbornly fragile. The authorities have launched an “anti-involution” campaign, but adjusting demand policy in order to boost domestic investment and consumption, at a time when exports may begin to run out of steam, is also becoming urgent. Despite the deterioration in public finances in recent years, the central government and local governments still have some room for manoeuvre to act.
India's economic growth surprised on the upside between April and June 2025 (+7.8% y/y). However, activity is less dynamic than it appears, and the downside risks to growth are high. Household consumption remains sluggish. To support domestic demand and offset the impact of the rise in US tariffs on activity, the government has announced a reduction in VAT rates, even though its fiscal room for manoeuvre is limited. The central bank is likely to remain cautious in its monetary easing, as downward pressure on the rupee remains strong. In the medium term, the growth outlook could deteriorate if the United States maintains tariffs on Indian exports that are much higher than those on products from other Asian countries.
Indonesia is less exposed to the consequences of the US tariff increases than other ASEAN countries, but risks are tilted to the downside. Companies have begun to suspend their investments. Against this backdrop, the authorities have stepped up measures to support the economy. The central bank has cut its key interest rates more than in other Asian countries, and the new Finance Minister has announced an increase in social spending. Public debt remains under control, but it is financed mainly on bond markets, particularly by foreign investors who are concerned about fiscal slippage under the Prabowo administration. However, although this government is less conservative than the previous one and the situation calls for greater vigilance, the risks to debt sustainability are contained.
Turkish economic growth is slowing down. Excluding changes in inventories, final demand contracted in Q2 2025, after slowing significantly in Q1. In doing so, it rebalanced with less consumption and more investment. The contribution of foreign trade has become negative, but for the time being, the current account deficit remains contained thanks to lower energy bills and tourism revenues. Persistent inflation remains the main obstacle to growth, not only because of its detrimental effects on purchasing power and external competitiveness (through the appreciation of the real exchange rate), but also because of the constraints it imposes on monetary policy in a context of temporary but recurring financial instability
Poland is expected to join the group of the world's 20 largest economies by 2025. Its GDP in nominal terms is expected to exceed USD 1 trillion this year. The country could also see its GDP per capita (in volume and PPP terms) surpass that of Japan, according to IMF forecasts. The Polish economy continues to outperform in the region. In 2025 and 2026, investment and consumption will be the key drivers of growth. Inflation has returned to the official target range since July, thus providing greater flexibility for monetary policy. On the other hand, fiscal room for manoeuvre is more limited, even if consolidation will be gradual.
Electoral uncertainty weighed heavily on Romania's economic activity last year. In 2025 and 2026, real GDP growth is expected to improve only slightly. Inflation has accelerated over the past two months and will continue to rise in the short term, while it is ticking lower in all Central European countries. However, the monetary authorities are not expected to change gear and will likely maintain a status quo in the short term. As for fiscal policy, the scope for supporting the economy is significantly reduced due to significant consolidation measures.
As a result of monetary tightening, Brazil's economic growth has been losing momentum over the last two quarters. Nevertheless, the slowdown in domestic demand is facilitating the disinflationary process, which is further bolstered by decreasing food and oil prices, along with the appreciation of the real. Despite highly restrictive monetary conditions, labour and credit markets continue to exhibit areas of resilience within the economy. The impact of trade tensions with the United States are currently limited, as lost exports find alternative destinations. Diplomatic efforts, combined with Brazil's geostrategic position, point to a possible easing of tensions ahead
Mexican economic growth held up well in the first half of 2025. The slowdown is expected to be more pronounced in the coming quarters: export momentum is likely to diminish due to the implementation of US tariffs, while domestic demand is expected to remain sluggish. Inflation is expected to decelerate moderately, and the cycle of monetary policy easing is likely to continue in 2026. Public finances represent a structural weakness in the Mexican economy. Consistent support for the oil company Pemex, fiscal spending rigidity and overly optimistic projections used by the government when setting its annual budget have resulted in the failure of the consolidation policies proposed by successive administrations. Consequently, the fiscal deficit has been widening since 2019
Since the spring, the macroeconomic and financial situation has deteriorated significantly. The successful stabilisation of 2024 was ultimately short-lived. The economy is expected to have formally entered recession in the third quarter. The current account is once again in deficit despite very restrictive fiscal policy, and despite massive support from the IMF since April, official foreign exchange reserves remain low compared with upcoming external debt repayments in 2026. Since September, the government has benefited from the support of the US Treasury, and President Milei's party emerged victorious from the mid-term elections, which has reassured investors
In Colombia, economic growth is rebounding after two years of poor performance, but several sectors are still lagging behind and investment is still weak. Attention is now turning to the 2026 parliamentary and presidential elections, which could lead to major shifts in economic and fiscal policy. The next administration will inherit a record-high fiscal deficit and a rapidly rising public debt. With the fiscal rule suspended for three years, it will need to act quickly to lay the foundations for fiscal consolidation before investor confidence is eroded further.
The gradual stabilisation of the Egyptian economy is ongoing, driven by the restoration of foreign currency liquidity, even though the pace of reforms has been uneven. The rebound in activity, bolstered by household consumption, has exceeded expectations, despite a restrictive fiscal and monetary environment. The decrease in inflation appears to be sustained and should allow for continued monetary easing in the coming quarters. The outlook for foreign currency liquidity is positive, thanks in particular to substantial financing from bilateral and multilateral creditors. The public finance landscape is more complex: consolidation efforts are genuine, despite the slow pace of some reforms, yet the interest burden continues to be a significant source of vulnerability
The Moroccan economy continues to gain momentum. Largely unaffected by the tightening of US tariff policy, it has recorded solid GDP growth since the beginning of the year. Domestic demand is strong, driven by investment. Despite headwinds in the automotive sector, macroeconomic risks are contained, and the economic outlook is positive. However, current social pressures could have a negative impact on public finances, which have remained under control until now. Improved financing conditions should enable Morocco to cope with any deterioration.
After the major upheaval of ‘Liberation Day’, the dust has settled somewhat. The level and scope of the new US tariffs are now largely known, and advanced economies are continuing to show resilience. Despite significant fluctuations in trade in the first half of the year, global trade has been braodly unaffected so far. The combination of headwinds (US tariffs, uncertainty) and tailwinds (low oil prices, Fed rate cuts, European measures) explains the gradual nature of the slowdown (in the US) and the recovery (in the Eurozone). The Eurozone is doing relatively well: with growth expected to strengthen and inflation under control, it is escaping the stagflationary scenario seen in the US, the UK and Japan.
US tariffs rose sharply in two stages: first in April, then following the signing of multiple trade agreements this summer. The impact of the first stage of this tariff increase is well known: trade flows to the United States were severely disrupted. However, global trade remains dynamic, particularly in Asia (a structural phenomenon) and Europe (which should benefit from internal momentum with the rebound of the German economy). The restructuring of trade flows (already underway with the rise of China) could accelerate as different countries seek elsewhere the opportunities lost in the United States.
Growth in the United States has slowed significantly compared with 2024 and is expected to remain moderate in the coming months, while maintaining some dynamism. Inflation is gradually rising again, mainly due to higher tariffs, while the labour market is already showing clear signs of weakening. These developments are resulting in a rebalancing of risks around the Federal Reserve's (Fed) dual mandate: downside risks to employment are increasing relative to upside risks to inflation. In our view, this should prompt the Fed to make two further cuts to its policy rate between now and the end of 2025, following the September cut. At the same time, fiscal policy is unlikely to stem the rise in the public debt ratio.
Growth in the Eurozone has so far proved fairly resilient to shocks (accompanied in particular by an acceleration in new lending against a backdrop of falling interest rates) and should gradually accelerate. Exports will continue to be weakened by Chinese competition and US protectionism. However, the foreseeable rebound in German growth will benefit economic activity in the Eurozone as a whole. Moreover, the buoyant labour market is supporting household purchasing power, without generating inflationary pressures, giving the ECB visibility and room for manoeuvre if necessary.
The resumption of German growth has been hampered by US tariffs. However, the outlook continues to brighten thanks to the government's strategy, which is structured around a vast programme of public investment and incentives for business investment. Beyond the anticipated economic rebound, the structural recovery of growth will depend on the country's ability to control its value chains and reposition itself in global trade amid increased competition. Inflation is expected to continue to decline. Despite unfavourable developments in industry, unemployment remains contained, and labour market tensions could quickly resurface. Public debt is expected to grow as a result of the widening budget deficit and rising interest rates (the effects of which will be felt by other Eurozone members).
France recorded a rebound in growth to 0.3% q/q in Q2 2025 after a more unfavorable period marked by political uncertainty. Although this uncertainty persists, the rebound in growth should be sustained. Unlike the political situation, other aspects of the French economy have improved (agricultural and aeronautical production, interest rates in the private sector, investment) or are on track to do so (German demand). The stabilization of the labor market and the sharp increase in business creation already confirm the rebound.
In Q2 2025, Italy's real GDP fell by -0.1% q/q. This decline marks the end of seven consecutive quarters of growth. Investment rose (+1% q/q) but could not compensate for the fall in net exports, while industrial production slipped 1.1% y/y. Despite the challenges, the latest turnover data and qualitative indicators show an increase in activity and new orders, as well as improved business confidence. The labour market remains robust: employment held steady at 24.2 million and the unemployment rate kept falling. Inflation stayed low at 1.7%, enabling purchasing power to rebound (+0.9% q/q)
After a strong first half of the year, Spanish growth should remain higher than that of its European neighbours in 2025 and 2026. Domestic demand is likely to remain the main driver, primarily supported by job creation, while the contribution of foreign trade is expected to become slightly negative. The budget deficit and the debt-to-GDP ratio should continue to benefit from significant nominal growth, which is nevertheless expected to slow gradually. Weak productivity could, however, hold back potential growth in the longer term, particularly as the available labour force begins to shrink.
Belgian growth fluctuated in the first half of this year, with a strong Q1 followed by a slowdown in Q2. Nevertheless, our nowcast for Q3 points to growth of 0.3% q/q, with renewed confidence among households and businesses. Export growth was subdued, hit by tariffs and the related uncertainty. However, the wage catch-up in neighbouring countries should improve Belgian’s competitiveness (wages are now rising faster than inflation in comparable European countries). House prices continue to rise, but the low number of new homes makes them less affordable. The public debt ratio is increasing by 2 percentage points per year and increased commitments to NATO are widening the deficit. The government has no choice but to take difficult decisions to reduce it.
After solid growth in H1 2025, the second half of the year is expected to see a slowdown (under the weight of US trade policy and UK fiscal policy). Despite the downside risks on the labour market and industry difficulties, growth is expected to be at a higher and stable rate in 2026 (+0.3% q/q on average) thanks to monetary easing. However, the policy mix will remain moderately restrictive, constrained by high inflation and gilt market pressures. Striking a balance between fiscal consolidation and growth remains a challenge in the UK.
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.
