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00:29:27 - Emmanuel Laborde
Hello both.
00:29:55 - Christine Peltier and Cynthia Kalasopatan Antoine
Hello Emmanuel, hello everyone.
00:29:58 - Emmanuel Laborde
With you, we will look ahead to 2026 through the perspective of the emerging economies that you monitor throughout the year for the Economic Research. We will begin with a broad overview. Hélène mentioned that the global growth figures for 2025 were quite favourable. How does growth, which remained relatively stable in 2025, appear for the upcoming year in the economies you observe?
00:30:23 - Christine Peltier
The initial part of the response is that emerging economies will indeed continue to perform well. However, the average economic growth rate is expected to decelerate slightly. This average growth was 4.2% in 2024. It is expected to reach 4.1% in 2025 and to dip just below 4% in 2026.
00:30:39 - Emmanuel Laborde
You are providing us with the averages, and we understand the principle that there will always be rates both above and below. Let us attempt to analyse this further by dividing it into two groups. In the first group, which regions or countries are expected to experience a slowdown in growth?
00:30:59 - Christine Peltier
Two main regions are projected to undergo a slowdown in 2026: Asia and Latin America. To begin with, Asia is expected to experience a fairly marked slowdown, yet it will continue to be the most dynamic region. Asia's economies are heavily reliant on the export sector. Exports have performed much better than expected since the beginning of the year and are expected to slow in the short term. In addition, the most advanced countries in emerging Asia are vulnerable to the risk of a cyclical downturn in the AI sector.
00:31:31 - Christine Peltier
So we expect a slowdown next year.
00:31:33 - Emmanuel Laborde
When we talk about Asia, it is essential to take a moment to reflect on the two major players, India and China. What is the prevailing trend?
00:31:40 - Christine Peltier
In India, growth is expected to remain among the strongest in the region, nearing 6.5% in 2026. In China, in an external environment that is becoming less favourable, growth will increasingly rely on the authorities' ability to strengthen confidence and stimulate household consumption. However, we hold a rather pessimistic view regarding the rebalancing of China's growth sources, at least in the short term. Consequently, growth will experience a moderate slowdown. At the same time, the export sector will continue to be, on the one hand, a key driver of Chinese growth and, on the other hand, a strategic tool in the competition with the United States. This reliance on exports will undoubtedly have repercussions for the rest of the world.
00:32:23 - Emmanuel Laborde
Another region of interest for us is Latin America?
00:32:26 - Christine Peltier
Yes, growth will slow in Latin America. It is a region that is less exposed to the impact of US tariffs or the slowdown in global trade compared to Asia. However, it remains vulnerable to commodity price fluctuations. Most importantly, significant macroeconomic vulnerabilities, especially in public finances, will constrain economic policy-making.
00:32:51 - Emmanuel Laborde
There exists another group where growth is projected to accelerate. We are now examining them. Which regions of the world will be affected, Cynthia?
00:33:00 - Cynthia Kalasopatan Antoine
Two regions are expected to experience acceleration: Africa-Middle East and Central Europe. Let’s start with the Africa-Middle East region, which merits attention. Economic growth is forecasted to rise in 2026, driven by the strong performance of the Gulf countries. These countries have, thus far, remained largely insulated from the economic consequences of geopolitical unrest and US tariff policies. They are reaping the benefits of both economic diversification initiatives and the increase in oil production mandated by OPEC+.
00:33:39 - Emmanuel Laborde
Another region you mentioned is Central Europe. Will consumption once again serve as the main driver of growth in this region?
00:33:48 - Cynthia Kalasopatan Antoine
Yes. In Central Europe, economic growth is expected to improve further in 2026. Indeed, it will be primarily fuelled by consumption.
00:33:59 - Cynthia Kalasopatan Antoine
And that's not all.
Investment, which has weakened significantly over the last few quarters, is expected to recover, aided by European funds. This is a crucial point. We must remember that a substantial amount of the recovery and resilience funds are still pending transfer to Central European countries. These funds must be disbursed by the end of 2026.
00:34:20 - Emmanuel Laborde
Central Europe encompasses a large area. Can we focus on a few countries that are particularly noteworthy?
00:34:28 - Cynthia Kalasopatan Antoine
Absolutely. In the region, one country that particularly stands out is Poland. The Polish economy has been one of the top performers in the region during the post-COVID era, driven by strong domestic demand. And this momentum is expected to continue into 2026. Additionally, Bulgaria will be in the limelight as it is set to join the euro zone on 1 January 2026. Furthermore, we should not overlook Türkiye, which is projected to experience significant growth next year, provided that the political climate does not hinder monetary policy easing.
00:35:12 - Emmanuel Laborde
Monetary policy is an area of interest for us. It serves as an excellent indicator for forecasting and understanding what these regions can expect. We will examine both monetary and fiscal policies. Let us begin with monetary policies, which should be supportive overall. Can we be fairly optimistic?
00:35:29 - Christine Peltier
Yes. In fact, certain external factors that supported disinflation and the easing of monetary policy in emerging markets during 2025 are expected to continue. Therefore, we expect monetary easing in emerging markets to continue. Policy loosening is even likely to extend to more countries, especially as initial policy rate cuts are expected in Brazil and Hungary. However, the average extent of the policy rate decline in 2026 is projected to be more conservative than that of 2025. Firstly, this is due to the uneven pace of disinflation. For instance, inflation rates are already low in Asia, and they could rise again in some countries, such as India. In China, deflationary pressures are expected to ease somewhat. Conversely, in Central Europe, wage pressures remain high, and in countries like the Czech Republic and Hungary, for example, increasing property prices may also lead central banks to keep a more cautious stance.
Moreover, while the risks linked to international financial conditions appear to be limited in the short term, capital flows may experience greater volatility, and episodes of currency depreciation in emerging markets could be more frequent in 2026, especially in the lead-up to elections or due to concerns regarding public finances. In this context, Colombia and Brazil will be countries to monitor.
00:36:52 - Emmanuel Laborde
Another significant point is fiscal policy.
00:36:55 - Cynthia Kalasopatan Antoine
Budget deficits and public debt levels are generally higher than they were prior to the COVID crisis. As a result, fiscal policies are constrained by the necessity to halt or at least mitigate the increase in debt ratios. Therefore, fiscal support for growth is likely to diminish in the coming years.
00:37:18 - Emmanuel Laborde
Could you provide us with a few examples to illustrate this?
00:37:20 - Cynthia Kalasopatan Antoine
In Central Europe, the fiscal adjustment process is expected to be quite gradual. In Türkiye, the state of public finances offers some room for manoeuvre if necessary, despite an increase in the budget deficit. In India, public finances exhibit considerable structural weaknesses; however, the government is focusing on growth and has recently reduced VAT rates. In China, public finances have been deteriorating for several years, yet both the central and local governments still have some policy flexibility to support growth in 2026.
00:37:58 - Emmanuel Laborde
You have just mentioned China, and we will undoubtedly continue to concentrate on this major player. Developments in global trade and China's actions are crucial for understanding what may transpire in the upcoming year. Will China maintain its aggressive approach in gaining new export market shares?
00:38:14 - Christine Peltier
Indeed, since the start of the year, Chinese firms have adopted strategies to address the US tariff shock and to respond to weak domestic demand within China. Consequently, these companies have redirected their exports to other markets. They have increased their market share thanks to substantial price reductions and robust non-price competitiveness. Will this trend continue in 2026? Chinese firms may not possess the same ability to sustain their aggressive pricing strategies. The yuan is currently slightly less weak than it was at the beginning of the year. Furthermore, for several months, Chinese authorities have been working to reduce production overcapacity.
00:38:58 - Christine Peltier
There is also the US tariff issue.
00:39:04 - Christine Peltier
Although the US has recently lowered tariffs on Chinese products, these tariffs are still high. Additionally, other trading partners may impose more protectionist measures. Therefore, we can expect that Chinese exports will be somewhat less dynamic in the coming months.
00:39:21 - Emmanuel Laborde
Thus, while somewhat less dynamic, Beijing's political aspirations remain exceedingly ambitious and aggressive.
00:39:29 - Christine Peltier
Yes, that’s the “problem”. We have already mentioned the significance of exports as a key growth driver for China. The next five-year plan, set to commence in March 2026, will continue to prioritise emerging industries, innovation and China’s technological autonomy. China will therefore continue to focus on sectors such as advanced technologies, green energy, artificial intelligence and aerospace. And it can be expected that certain Chinese firms will continue to be highly competitive on the global stage.
00:40:06 - Emmanuel Laborde
Continuing with the topic of China, which is undeniably a focal point. Another question arises: How will China navigate its trade relationships, especially with Central Europe?
00:40:17 - Cynthia Kalasopatan Antoine
It is true that China is both a competitor and a partner. It is true that competition is very intense, as evidenced by China's increasing market share in Central Europe. However, China is also establishing itself as a significant partner in the region, particularly through increased foreign direct investment, especially in the automotive sector in Slovakia and Hungary.
00:40:48 - Emmanuel Laborde
You mentioned the automotive industry, which serves as an excellent segue for me, given that this sector is a cornerstone of the economy in Central Europe. How is it going?
00:40:58 - Cynthia Kalasopatan Antoine
In Central Europe, the trend diverges significantly from that observed in Western Europe. In fact, exports of vehicles and spare parts have held up well in the region since the beginning of the year, due to a strong intra-European dynamic. Support also comes from the diversification of markets, particularly the UK and Türkiye.
00:41:25 - Emmanuel Laborde
What does the outlook for 2026 in this sector look like?
00:41:29 - Cynthia Kalasopatan Antoine
In the short term, I would say that there is some resilience in exports, especially for automotive products. Central Europe continues to be competitive, despite the appreciation of local currencies. The production costs are favourable, as wages in Central Europe are lower than in Western European countries. Furthermore, it is important to note that the fears of a global shortage of spare parts, which escalated last October, have begun to ease. However, it is important to keep in mind that the automotive industry remains highly integrated in the global production chain. In any case, it is vulnerable to a potential supply shock. We have recently seen tensions surrounding Nexperia.
00:42:26 - Emmanuel Laborde
Thank you very much. It’s now 4:44 p.m. for those of you watching us live. Let us take a moment to consider other points that we will need to monitor next year before moving on to our third panel. In just a moment, Christine.
00:42:39 - Christine Peltier
Obviously, geopolitical risks remain high. Additionally, I would like to highlight the various elections that are scheduled to take place in emerging countries.
00:42:46 - Christine Peltier
The election calendar for 2026 will be quite busy.
00:42:47 - Emmanuel Laborde
Cynthia?
00:42:49 - Cynthia Kalasopatan Antoine
In Central Europe, defence spending will be a priority in 2026. We will also be keeping an eye on the progress of investments in artificial intelligence.
00:43:01 - Emmanuel Laborde
Thank you very much.
