The outperformance of US growth is underpinned by productivity gains that are significantly higher than those of the previous decade. This acceleration is due more to the spillover effects of past investments and post-pandemic changes (such as remote working) than to artificial intelligence (AI). The roll-out of AI is too recent for productivity gains to have already made their mark at the macroeconomic level. In the medium term, however, AI is expected to support the upward trend.
The blockade of the Strait of Hormuz over the past two and a half months has significantly reduced the amount of oil available globally. The use of regional bypass, and the release of commercial stocks and strategic reserves are only partial and temporary solutions. Without the restoration of oil flows through the strait, the growing shortfall in petroleum products will accelerate the rise in oil prices and destruction in global oil demand.
Emerging Asian countries are particularly vulnerable to the energy shock caused by the conflict in the Middle East. Beyond supply issues, rising prices pose a significant risk to these countries, where domestic demand is a major driver of economic growth. To limit the impact, some Asian countries (notably India, Indonesia, Malaysia and Thailand) have opted to partially subsidise energy and fertilisers. The additional cost to their public finances is expected to remain manageable provided that the average crude oil price does not exceed USD 100 per barrel over the year. However, this subsidy policy poses risks to their public finances, particularly if external financing conditions tighten. Indonesia is the country most exposed to a rise in US long-term interest rates.
The energy shock is beginning to feed through into French inflation. In March and April, inflation was limited to refining activities and fuel prices. It is expected to affect more sectors in the second quarter, according to the European Commission’s survey on three-month selling price expectations. In France, the pass-through is expected to mainly affect intermediate goods in Q2. However, inflationary pressures on consumer goods and services or construction are expected to remain quite moderate. These factors are consistent with our scenario of a limited acceleration in French inflation and a moderate impact of the energy shock on growth.
The trade openness of EU countries represents both a strength and a weakness, making active initiatives necessary to enhance economic security. According to the World Bank, in 2024 the EU’s trade openness stood at 92%, compared with 25% for the United States and 37% for China. For Italy, the figure was 63%, among the highest among Member States, with particularly strong exposure to extra-EU demand. The evolution of the international geopolitical and economic context, together with the country’s dependence on the import of energy materials, suggests that careful consideration should be given to the potential vulnerability of Italian imports to possible total or partial disruptions in the external supply of strategically significant products.
Following a prolonged period of low interest rates (2015-2020), the inflationary shock of 2021-2023 caused interest rates to rise sharply across the Eurozone, including France. This rate shock, the scale and speed of which had not been seen since the early 1990s, made borrowing more expensive, curbed investment in housing, and altered the relative returns among deposits, regulated savings accounts, life insurance and market investments.
Latin America is considerably less exposed than other emerging regions to the repercussions of the war in the Middle East. This is mainly due to its very low risk of hydrocarbon supply disruptions: the vast majority of imported hydrocarbons come from the United States and other countries in the region, with only a negligible portion coming from the Middle East. Furthermore, several countries are net exporters (Argentina, Brazil, Colombia and Ecuador).
Will a different situation lead to different outcomes? In other words, will the combination of weaker demand and more moderate supply constraints in 2026, as compared to 2022, help to limit the rise in inflation? Having illustrated the impact of the energy shock caused by the war in the Middle East on six key variables in the Eurozone in our previous Chart of the Week, we now move on to a new comparison between these two dates, this time focusing on the relative levels of supply and demand issues. In the Eurozone, weaker demand has resulted in a more pronounced decline in inflation, unlike in the United States, where both demand and inflation have remained more sustained
Will the same causes produce the same effects? In other words, will the outbreak of war in Iran and the associated surge in oil prices (+44% to date) and gas prices (+64%) lead to an inflationary shock comparable to that of 2022? Will their negative effects on growth be the same as those of the war in Ukraine and the ensuing energy shock (a rise in oil prices of around 30% between 23 February and its peak in early June 2022, and a rise in gas prices of around 210% between 23 February and the peak in late August 2022)? The risk cannot be ruled out. Indeed, there are similarities and numerous uncertainties.
During her hearing on 18 March 2026 before the Committee on Economic and Monetary Affairs of the European Parliament, Claudia Buch (Chair of the Supervisory Board of the European Central Bank) highlighted the absence of decline in the quality of bank assets and the stability of non-performing loan ratios. These ratios are a good indirect indicator of the financial health of borrowing corporations in the European Union (EU), particularly in the manufacturing sector. When viewed from this perspective, the proportion of firms in this sector facing severe financial difficulties appears to be lower at the start of 2026 than at the start of 2022. This suggests, by extension, that these firms are in better financial health and have a greater ability to absorb shocks
For several years, Central Europe has been facing a marked demographic decline. Its magnitude varies from one country to another. The total population decline from 2004 to 2025 ranges from -0.3% in Slovakia to -17.2% in Bulgaria. The Czech Republic is the only country in the region to have seen a population increase over the same period. The working-age population (ages 15–64) is also declining. However, the situation is less unfavourable in Hungary, Poland, the Czech Republic and Slovakia, while Romania and Bulgaria are experiencing a more significant decline due to migration patterns. Net migration flows were negative for Bulgaria until 2019 and for Romania until 2021. However, this trend has reversed in recent years
Market opportunities in China are shrinking dramatically due to the country's shift towards higher-end products and its import substitution policy. 2025 marked an unprecedented turning point in this regard: European exports to China fell by 14% in nominal terms and by 10.2% in volume, as the country's share of total EU exports (7.5%) reached its lowest level in nearly fifteen years.
In 2025, US–China trade tensions led to a sharp drop in US imports from China, while Chinese exports to other regions increased, indicating early signs of trade diversion. For Italy, estimates point to limited but notable export displacement, concentrated in specific sectors, alongside potential gains from lower-cost Chinese intermediate and capital goods. Italian firms report stronger competitive pressures and heightened uncertainty, particularly among exporters. Despite the challenges posed by tariffs and the redirection of Chinese exports in 2025, Italian exports have proved resilient, with growth recorded especially towards the United States.
According to the ECB's Bank Lending Survey (BLS), some banks in the Eurozone may tighten their credit standards for households more significantly in 2026 than in 2025. The reason for this is the more constraining calculation of regulatory capital requirements. In contrast, the tightening would be less severe for corporations. This desynchronisation is unusual. It tends to illustrate the effect of the ramp-up of the output floor, which would particularly affect housing loans. However, the effect would remain very limited: only one in ten banks is considering to change its standards. New loans to households and corporations would keep their momentum largely unchanged.
Asian economies, excluding China, have experienced minimal disruption to their global trade shares despite higher US tariffs. This resilience stems from their export composition, which remains concentrated in electronics, a sector largely spared by US tariff increases and buoyed by AI-driven demand. While the strategy of redirecting Chinese exports from the United States to Asia and other global markets has intensified, it has not been sufficient to fully compensate for China’s decline in U.S. market share.
Ageing populations, rising long-term interest rates and increased defence spending are adding to the difficulties for public finances across the OECD. While fiscal consolidation – which can be measured by an improvement of the primary balance by at least 3% of GDP in 4 years – is essential for several member states, this is easier said than done. What can we learn from analysing 20 years of European public finance? Historical examples from EU countries show that expenditure-led consolidation can be an effective approach and tends to support stronger growth after it is completed.
Household spending intentions have been improving in the Eurozone for two years, and in January 2026, they returned to their early 2022 levels, despite a much more gradual improvement in the household confidence index. Households’ fears about unemployment and living standards in general have weighed on consumption and have contributed to its moderate growth. Moreover, these fears have continued to dampen consumer sentiment. However, these concerns are easing and no longer seem to be hindering a potential rebound in consumption, as evidenced by purchasing intentions.
According to estimates from the Institute for International Finance, net resident capital outflows from the Gulf reached USD 271 billion in 2025, while net non-resident capital inflows amounted to USD 228 billion. Since their 2022 peak, the oil prices and export revenues of the Gulf Cooperation Council (GCC) have been declining. However, the GCC has never before invested abroad as much, despite the drop in its current-account surplus. The surplus fell from 15.7% of GDP in 2022 to 8% in 2023, 5.9% in 2024 and 3.8% in 2025. At the same time, net resident capital outflows from the region rose by 10% (2023–2025).
March 4 will mark the first anniversary of Germany's announcement of its plans for massive investments in defense and infrastructure. The increase in public spending in Germany has already contributed to end the two-year recession (2023-2024) by 2025 – mainly through defense investments, according to our estimates. Infrastructure investments, on the other hand, are currently below the planned amounts. 2026, however, is expected to see a clear acceleration of these programmes, which should bolster a strong pickup in growth and restore Germany’s role as a driving force in the euro area.
Since 1 January 2025, banks in the European Union have had to consider the loan-to-value (LTV) ratio of loans to households for house purchases when calculating their regulatory capital. This new prudential requirement is ill-suited to the French market. The criteria for granting home loans are based mainly on the debt service-to-income ratio, leading to historically low default rates. However, since mid-2025, the supervisor has been paying increasing attention to the LTV of home loans in France, which is fuelling concerns about higher borrowing costs and an increase in down payment rates.
On 1st January 2026, Bulgaria became the 21st member of the Eurozone, nineteen years after joining the European Union. Since June 2025, Bulgaria has satisfied the EU's convergence criteria, which include price stability, sustainability of public debt, exchange rate stability and long-term interest rate stability. The European Parliament granted its approval in July 2025, and shortly thereafter, the rating agencies Fitch and S&P upgraded Bulgaria's sovereign rating from BBB to BBB+.
Private fixed investment in the United States is ‘K-shaped’. Investment in artificial intelligence has become a major driver of US growth, whereas non-AI adjacent components are contracting. However, AI investment is particularly import-intensive.
2025 saw a renewed appetite among European consumers for electric cars. This enthusiasm comes after a lacklustre 2024, when registrations stagnated following the late 2023 announcement regarding the reduction of budgetary support in France and the complete withdrawal of such support in Germany. Yet, numerous studies, including the joint report by Pisani-Ferry and Mahfouz, had deemed these subsidies crucial.
Since 2020, households’ real estate purchasing capacity has improved significantly in the tightest housing markets. Our metric, which monitors changes in the amount of space a typical household can purchase, has increased by almost 20% in areas where demand for housing significantly outstrips supply. In contrast, in less constrained or even unconstrained areas, purchasing capacity decreased during the same period.
Between 2013 and 2018, India experienced robust productivity growth (increasing by a factor of 1.3, comparable to Vietnam, slightly lower than China, and higher than Indonesia, Malaysia, the Philippines and Thailand). However, from 2019 onwards, productivity in India has stagnated, while it has continued to rise in other countries (with the exception of the Philippines). This trend is particularly concerning given that GDP per capita remains low (in PPP, it was 2.4 times lower than that of China in 2024) and unemployment is high, especially among young people (15.6% in 2024 according to official data). Without a rapid increase in productivity, India could remain a ‘middle-income’ country.
Weekly charts highlighting points of interest in the world economy
