Eco Conjoncture

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Eco Conjoncture October 31, 2024

United States

US presidential election: the underlying economic issues
11/04/2024 • By Anis BENSAIDANI

The presidential election on 5 November is associated with underlying but potentially decisive economic issues.Political aspects: The election pits Vice President Kamala Harris (Democrat) against former President Donald Trump (Republican). The winner will take office on 20 January 2025. The election looks set to be particularly closely contested, despite the momentum in Donald Trump's favour at the end of the campaign. At the same time, voters will be deciding on the composition of the next Congress, which will significantly affect the new administration's room for manoeuvre.Economic context: The vote comes against a backdrop of an apparently stronger economy. This is illustrated by solid macroeconomic performances, despite recent shocks, which are seemingly auguring a soft landing

Eco Conjoncture October 15, 2024

South Africa

South Africa at a crossroads
10/15/2024 • By Lucas Plé

The macroeconomic outlook for South Africa is gloomy. After a year of unprecedented electricity shortages in 2023, economic growth is only expected to rebound very slightly in 2024. However, investor confidence has been boosted with new political forces entering into government in June 2024, following the general election in May. The new coalition government, with populist parties largely absent, offers the prospect of a degree of political continuity, continued fiscal consolidation and the implementation of reforms designed to increase the medium-term economic-growth potential. However, this government of national unity is built on uneasy alliances

Eco Conjoncture July 16, 2024

Poland

Poland: a solid economy with nearshoring opportunities

07/16/2024 • By Cynthia KALASOPATAN ANTOINE

Poland’s economy has generally shown resilience during periods of turbulence since the financial crisis of 2008-2009. For instance, in 2009, the country was able to avoid a recession in contrast to neighbouring countries. Since 2020, successive shocks have constrained GDP growth momentum, but strong fiscal buffers enabled the authorities to implement generous supportive measures. The country remains amongst the best performing economies in the region in the early months of 2024, with its GDP above 11% in Q12024 compared to its pre-COVID levels. Overall, the country reinforced its position in Europe, judging from the increase of Poland’s economic weight in the EU (measured by GDP in purchasing power parity) and gains in market share

Eco Conjoncture June 20, 2024

India

India : growth is strong but income and employment levels remain low
06/20/2024 • By Johanna MELKA

For the fiscal year 2023/2024, which ended at the end of March 2024, economic growth in India reached 8.2%, the highest rate among Asian countries. Over the past twenty years, growth reached 6.3% per year on average. Yet, despite this performance, India’s GDP per capita remains low. In addition, income inequalities have increased and unemployment rates are high (especially among young people), despite higher education levels. The low levels of income and employment can be explained by the employment structure, which remains concentrated in agriculture, a sector with low value added. Despite the major reforms adopted by the Modi government to stimulate development of the manufacturing industry, the sector did not create any jobs over the period 2012-2019

Eco Conjoncture May 13, 2024

European union

Europe on the front line: a review of its climate action and economic support
05/13/2024 •

Since the adoption of the European Green Deal on 11 December 2019, European climate strategy has stepped up. Far from paralysing its climate action, the health crisis was the backdrop for the adoption of NextGenerationEU. This recovery plan has mobilised considerable resources to meet the European Union’s needs in terms of climate and digital transition, healthcare and education. While its implementation is only halfway through, the first positive effects can already be observed. Other mechanisms (including REPowerEU, the carbon border adjustment mechanism and the Critical Raw Materials Act) have been added to this plan to respond to the new challenges that have arisen since the Covid-19 pandemic and the war in Ukraine (supply security, energy dependence)

Eco Conjoncture 17 janvier 2024

Eurozone

The residential property market in the eurozone put to the test of monetary normalisation

01/17/2024 • By Guillaume DERRIEN

Because of its significance and its many connections with the real and financial spheres, the residential property sector plays a central role in the economic cycle. The acceleration in property prices in the eurozone, which began in 2014, the year in which the monetary bloc emerged from recession, intensified after the "Great Lockdown" of 2020, peaking at almost 10% year-on-year in the first quarter of 2022. The tightening of monetary policy by the European Central Bank, unprecedented in its scale and speed, seems to have put a halt to this progress, although at this stage there are significant differences between countries. Economies where the property market had withstood the subprime crisis better now appear to be in greater difficulty in the face of tighter credit conditions

Eco Conjoncture December 19, 2023

France

Housing supply challenges in France: an unsolvable issue?
12/19/2023 • By Stéphane COLLIAC

In France, the housing sector has undergone profound changes over the past two decades in order to respond to the shift in demand towards building renovation and maintenance in particular. This transformation has gathered pace since 2016 against a buoyant economic backdrop, with a growing real estate market and particularly favourable financing conditions (low interest rates and few business insolvencies). However, while the sector will have to continue to adapt (i.e. the gradual ban on renting poorly insulated dwellings), it is grappling with a deterioration of its economic environment. Rising interest rates and business insolvencies could make this new adaptation more complicated to navigate, at least in the short term.

Nigeria: remaining on course

Nigeria

Nigeria: remaining on course
10/25/2023 • By Stéphane ALBY

Nigeria’s economy is fragile. Despite the rise in oil prices in 2021 and 2022, macroeconomic stability has continued to deteriorate. This is due to the low level of oil production, an artificially overvalued exchange rate and the surge in energy subsidies. Without a change in economic policy, the situation was only going to get worse. The new President, Bola Tinubu, decided to act quickly and decisively. Shortly after taking office in May, he announced the flexibilization of the exchange rate system and the end of energy subsidies. Unsurprisingly, the first measure fuelled inflation, which is expected to come close to 30% by the end of the year. More problematic is the fact that we are once again seeing a gap between the official exchange rate and the parallel exchange rate

Eco Conjoncture August 29, 2023

Global

Climate neutrality: the race has begun
08/29/2023 • By Jean-Luc PROUTAT

Record temperatures in China and the United States, unprecedented forest fires in Canada, historic droughts in Spain and Morocco...: summer 2023, which looks to be the hottest ever recorded, confirms, as if it were still necessary, that climate change is here, that its effects are increasing, and that it is not sparing anyone. Its origin lies in a phenomenon that has been known for a long time, since it was first identified in 1824 by the French mathematician Joseph Fourier: the greenhouse effect, caused by human activities releasing a quantity of gas of the same name into the atmosphere.This is a cumulative process which, unless we want to risk intolerable global warming, will have to stop

Eco Conjoncture June 29, 2023

Asia

Sri Lanka, Pakistan and Bangladesh: weakened economies highly vulnerable to shocks
06/29/2023 • By Johanna MELKA

Apart from being located in South Asia, Sri Lanka, Pakistan and Bangladesh have the common weakness of being very vulnerable to exogenous shocks, particularly those related to the commodity cycle and climate change. The Covid-19 epidemic and the very sharp rise in commodity prices in 2021 and 2022 have therefore exacerbated the macroeconomic imbalances of these countries, whose public finances and external accounts were already fragile. Consequently, Sri Lanka defaulted on its external debt in 2022. This is not yet the case in Pakistan, although the risk is very high. As for Bangladesh, it has been much more resilient to shocks than its two neighbours and should escape a default.

Eco Conjoncture 9 mars 2023

Gulf countries

Gulf countries and the challenge of the energy transition

03/09/2023 • By Pascal DEVAUX

The Gulf countries (GCC) – Saudi Arabia, Bahrain, United Arab Emirates, Kuwait, Oman and Qatar – are experiencing an economic boom. The discipline of the cartel of oil-producing countries and international geopolitical tensions are keeping oil and gas prices high and feed into the fiscal and external accounts of countries still highly dependent on oil revenues. Contrary to previous periods of economic upturn, it seems that most governments are maintaining a degree of fiscal discipline, which, over the medium term, should reduce vulnerability to variations in oil revenues. In the longer term, climate change and the associated energy transition pose an existential challenge for these hydrocarbon-based economies

Eco Conjoncture 10 février 2023

Spain

Productivity, an endemic weakness of the Spanish economic model
02/10/2023 • By Guillaume DERRIEN

"España Digital 2026", “Estrategia Española de Ciencia, Tecnología e Innovación 2021–2027” and “España 2050”: since the pandemic, there has been no lack of structural programmes designed to increase the competitiveness of the Spanish economy. The Spanish Government is right: the country's fundamental problems, which contributed to the 2011 crisis, persist today. Spain has one of the lowest levels of private and public investment and one of the lowest stocks per capita of productive capital in Europe. In addition, the country still suffers from a significant productivity deficit when compared to its major European partners, a deficit which it is struggling to make up as it is intrinsically linked to its low capital stock

Eco Conjoncture 10 février 2023

Spain

Productivity, an endemic weakness of the Spanish economic model
02/10/2023 • By Guillaume DERRIEN

"España Digital 2026", “Estrategia Española de Ciencia, Tecnología e Innovación 2021–2027” and “España 2050”: since the pandemic, there has been no lack of structural programmes designed to increase the competitiveness of the Spanish economy. The Spanish Government is right: the country's fundamental problems, which contributed to the 2011 crisis, persist today. Spain has one of the lowest levels of private and public investment and one of the lowest stocks per capita of productive capital in Europe. In addition, the country still suffers from a significant productivity deficit when compared to its major European partners, a deficit which it is struggling to make up as it is intrinsically linked to its low capital stock

Eco Conjoncture 2 février 2023

United States

United States: Will the Fed’s QT2 balance sheet reduction programme last the course?
01/21/2023 • By Céline CHOULET

In June 2022, the US Federal Reserve kick-started a programme to reduce the size of its balance sheet (QT2). However, banking regulations could hinder its ambitions. The first quantitative tightening (QT1) programme, which was launched by the Fed in October 2017, had already been curtailed early due to the liquidity requirements imposed on banks. Balance sheet constraints could in turn bring QT2 to an early end. The tightened leverage standard is already reducing the ability of banks to act as intermediaries in the secondary markets for US Treasury securities while federal government financing needs continue to grow.

Conjoncture 12 octobre 2022

Chile

The "right balance": an economic and political challenge
10/12/2022 • By Hélène DROUOT

Gabriel Boric, the candidate of the very broad left-wing coalition, won the second round of the presidential election last December. He took office in mid-March, and is already facing numerous challenges. His general policy speech at the beginning of June, and then the tax reforms he brought forward at the end of June, have confirmed his intention to implement economic and social policies which differ from those of previous governments. His ambitious objective for his term of office is to begin a rapid "green transition", but also to find the "right balance" between the need for reforms in favour of greater social justice and the need to remain "fiscally responsible"

Conjoncture 26 juillet 2022

France

Reconciling short-term and medium-term challenges

07/26/2022 • By Stéphane COLLIAC

Over the next five years, French economic policy will have to continue to deal with structural issues, such as full employment, the delay of companies in terms of robotisation, the competitiveness of companies and the place of industry. It will most likely also continue to focus, at least in the short term, on supporting household purchasing power, as it has done since 2019. These projects, which will have to be carried out in parallel, will have to be reconciled with the cost of the ecological and energy transition against the background of public debt that has already risen sharply and interest rates that are moving higher, albeit in a controlled way.

Conjoncture 19 juillet 2022

Algeria

A window of opportunity not to be missed

07/19/2022 • By Stéphane ALBY

The economy of Algeria was already in a precarious position in 2020 when it had to cope with the double shock of the Covid-19 pandemic and lower hydrocarbon prices. Since then, the situation has improved thanks to the rise in global oil prices and strong demand for gas in Europe. For the first time since 2014, the country should be able to post current account surpluses in 2022-2023, and then accumulate FX reserves. The risk of a balance of payments crisis in the short term is receding. But macroeconomic stability remains fragile as prospects for recovery are modest and public finances are structurally in deficit. The implementation of reforms is a priority to prevent economic troubles in the event of a new oil shock.

Conjoncture 19 juin 2022

Indonesia

Weakened by the pandemic, but solid enough to handle new shocks

06/19/2022 • By Johanna MELKA

The Covid-19 pandemic weakened Indonesia’s economy. Two years after the crisis, real GDP has returned to 2019 levels, but the labour market is still weak, the poverty rate is higher than before the crisis and investment remains subdued. According to the World Bank, the pandemic’s lasting impact on education and the labour market will cost the country 0.1 points of its long-term growth potential. Today, Indonesia must deal with a new unfavourable economic environment as commodity prices have dramatically increased due to the conflict in Ukraine and sanctions against Russia. Although growth is bound to be squeezed by the Ukrainian conflict, Indonesia’s external accounts should remain healthy and inflationary pressures should remain moderate

Conjoncture 14 juin 2022

South Africa

South Africa: A fragile economic recovery

06/14/2022 •

After an unprecedented contraction in activity in 2020, the strong rebound in 2021 did not allow South Africa to return to its pre-crisis level of GDP contrary to most emerging economies. In 2022, activity should remain subdued and growth below 2% in the medium term. The economic outlook remains largely constrained by the need for fiscal consolidation in order to contain the high risk of debt distress, the tense socio-political climate, and structurally by strong infrastructure constraints, first of which the electricity supply. The shock induced by the conflict in Ukraine is also exerting significant pressures that could make fiscal consolidation efforts difficult

Conjoncture 17 mars 2022

Colombia

Colombia: Public Finances – any cause for concern?
03/17/2022 • By Salim HAMMAD

Colombia’s public finances have come under the spotlight in recent years amidst recurrent adverse external shocks, rising social spending pressures, ongoing challenges in raising revenues, persistent (optimistic) biases in fiscal planning and, as of late, the back loading of fiscal consolidation plans following the Covid-19 shock. The rapid progression of the public debt ratio and the capacity for future policy adjustment have, in particular, become points of concern and have, since the summer 2021, materialized in Colombia losing its investment grade status

Conjoncture 18 décembre 2021

Global

More resilient supply chains after Covid-19 pandemic
12/18/2021 • By Guillaume DERRIEN

The Covid-19 pandemic has laid bare weaknesses and vulnerabilities in global supply chains. It has increased calls for making global value chains (GVCs) more robust and resilient, and reducing the dependence on East and Southeast Asia. Enterprises are in the process of improving the resilience of their supply chains by improving the transparency of their value chains, and building more redundancy in supplier networks, and transportation and logistics systems. At the macro-level, both the United States and the European Union have been updating their industrial strategies to increase their autonomy in strategic sectors. However, we should not forget that GVCs in itself is not the problem

Conjoncture 30 novembre 2021

Egypt

Egypt: persistent vulnerabilities
11/30/2021 • By Pascal DEVAUX

So far, Egypt’s economy has weathered the Covid-19 crisis without any significant worsening of its main macroeconomic indicators. GDP growth has remained positive, and the country's budget and external balances are relatively stable. The macroeconomic stabilisation achieved in previous years and external financial support are the main reasons behind these positive performances. In the short term, the outlook is mixed. The rebound in inflation, if it were to persist, could trigger a cycle of monetary tightening, with negative consequences for public finances. In addition, Egypt's external vulnerability remains significant given structural current account deficits and dependence on portfolio investment flows

Conjoncture 27 septembre 2021

Spain

Spain: the tortuous path to reindustrialisation
09/27/2021 • By Guillaume DERRIEN

In Spain, like in most Western countries, the 2008 crisis caused an unprecedented drop in industrial employment, the pain of which continues to be felt. In fact, there are almost 500,000 fewer manufacturing jobs than in 2008. Some of this decline, however, reflects an increasingly important shift from industrial firms to service offerings, which is not a bad thing. With the Covid-19 crisis and the EUR 69.5 billion Recovery and Resilience Plan (RRP), which will be rolled out over the next five years, strengthening industry in Spain has once again become an important area of focus for the authorities. A quarter of the RRP will therefore be dedicated to this objective

China

China's public finances, a tangled web
09/27/2021 • By Christine PELTIER

China’s public finances have been deteriorating for several years now, and the trend accelerated in 2020 with the Covid-19 crisis. Reforms introduced since 2014 have made the public sector’s accounts more transparent and improved the management of local governments’ budgets and debt. However, those changes have not stopped fiscal imbalances building up. In addition, large quasi- and extra-budgetary operations exist alongside the official budget, and there are many, sometimes opaque, links between the various public-sector entities. This means that analysing the public finances is often a complicated exercise.

Conjoncture 22 juillet 2021

Global

Economic recovery in the advanced countries: lessons from the past

07/22/2021 •

The Covid-19 crisis has deeply affected our economies. Although the rebound observed in recent months seems to have been confirmed, uncertainty persists over their capacity to fully recover. This article will look at how the G7 economies reacted during post-recession phases in the past, in terms of GDP, private consumption and investment. How quickly did GDP in these economies catch up with pre-crisis levels and trends? What were the most dynamic components of aggregated demand during recovery phases? Given the specific characteristics of the Covid-19 crisis, can it really be compared with previous shocks? These are some of the questions that we will discuss in this article while highlighting current sector disparities. 

EcoConjoncture, BNP Paribas Economic Research’s monthly review, lets you take a close look at economic, financial and banking issues and ecosystems in order to better understand the challenges, as well as the current and future developments of the global or national economy.

In EcoConjoncture, experts examine the factors in play that are transforming economies and societies (financial and economic crises, changes in the labour market, ageing populations, climate change, and the emergence of new technologies and their uses, etc.). They also look at the challenges and implications of various countries’ budgetary stances (economic growth, debt, inflation, public finances, employment, etc.) and the monetary policy choices of the main central banks (the US Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England). The national and international financial and banking regulations (in particular, the prudential rules relating to the supervision of banking institutions introduced by the Basel Committee), which aim to enhance the robustness of credit institutions, are also considered in order to better understand the issues and repercussions for the banking sector and for the real economy through individuals and companies.

Economies are reviewed at various levels: national (OECD countries, emerging economies), regional (European Union, euro zone, Asia, sub-Saharan Africa, Middle East, etc.) and global. The extended format of EcoConjoncture makes it possible to deal comprehensively with a theme and its challenges in the short, medium and long term.