After a year marked by global economic resilience and ending on a note of optimism, 2026 looks promising and could be a year of solid economic performance. In our baseline scenario, we expect most of the supportive factors at work in 2025 to continue to play a role in 2026 (favorable economic policy, AI, low oil prices), and even to gain momentum in the case of the German stimulus plan and European rearmament efforts. Growth in the Eurozone would thus stand out as stronger (1.6% in 2026 and 2027 after 1.5% in 2025), while US growth would stabilize at a rate close to but below 2%. Fiscal policy would, strangely enough, be both a factor supporting and hindering growth
Public finances in advanced economies are facing a combination of pressures. The structural rise in interest rates is already complicating the situation, but its effects are not yet being fully felt. When they do (at the end of the decade), most countries will need to generate primary surpluses in order to stabilise their debt ratios. At the same time, governments must fund age-related spending, defence and climate change mitigation. In this climate, higher growth would help to stabilise public debt-to-GDP ratios, and vice versa.
Growth in the United States is expected to come close to its potential pace in 2026. This resilience would mask “K-shaped growth”, supported by AI-optimism related investment and consumption by the wealthiest. Investment in other areas of the economy is not as dynamic, while most Americans face persistent inflation and a deteriorating labour market. At the end of Q1 2026, the Fed is expected to end its cycle of monetary easing, due to an emphasis on the employment component of its dual mandate. The fiscal impulse is expected to remain slightly negative in 2026 due to tariffs, with their scope still a key issue.
Growth in the Eurozone is expected to strengthen in 2026 (1.6%) primarily driven by investment and a resurgence in activity in Germany. Our forecasts indicate that inflation is likely to remain below the 2% target. However, the anticipated recovery in GDP growth may prompt the ECB to keep its rates unchanged until 2027 before raising them. The fiscal impulse is expected to remain largely neutral, as fiscal consolidation in France and Italy offsets the increase in the German deficit. Interest rates on new loans to households and businesses are projected to remain stable in 2026, with new loans continuing to decelerate for both households and businesses. However, sovereign rates are expected to rise moderately.
The German economy is undergoing a strategic transformation, with increased public spending poised to significantly change its economic model. This transformation has the potential to boost business investment and household spending, while also reducing the country's reliance on exports. The stability of GDP in Q3 2025 underscores this duality: the rise in public spending and private investment is offsetting the ongoing decline in exports. Following a growth rate of 0.3% in 2025, Germany's economic expansion is projected to gain considerable momentum in 2026 (1.4%) and 2027 (1.5%), with this growth gradually extending to the private sector. The rise in public debt is expected to remain manageable and temporary
French growth has been rebounding since Q2 2025, driven primarily by aeronautics production, but also by business investment in a context of decreasing interest rates. These two factors are coming along with two structural drivers: growth in services and public consumption. In 2026, these momentums are expected to continue. Additionally, exports should benefit from the rebound in German growth. Inflation is expected to remain low and household consumption to strengthen moderately, against a backdrop of continued high political uncertainty. French GDP growth is expected to return to its 2024 level (1.1%) in 2026, after a soft patch in 2025 (0.8%).
The Italian economy is showing some resilience: GDP experienced a modest rebound in Q3 2025, and moderate inflation is helping to maintain household purchasing power. We forecast growth to be around 1% over the next two years (1% in 2026 and 0.9% in 2027). Market confidence has been bolstered, as evidenced by improved ratings, due to political stability, fiscal consolidation, and a growing share of public debt held abroad. Exports are benefiting from a robust pharmaceutical sector and intra-EU sales, while trade with the United States remains positive. Despite an historically strong labour market, productivity remains low due to weak intangible investment, limited digitalisation and significant fragmentation within the business sector.
Spanish growth should continue to outpace Eurozone growth. It is underpinned by a dynamic labour market, which is generating gains in purchasing power and bolstering consumption. Investment, meanwhile, is benefiting from lower interest rates and European funding. This strong GDP growth will enable the country to generate primary surpluses and continue to reduce its public debt ratio. However, Spanish activity should come up against the constraint of full employment at the end of the decade, in the absence of significant productivity gains.
Growth is expected to reach 1.1% in 2026, down from 1.4% in 2025, the latter benefiting from an exceptionally strong first quarter. However, GDP growth is likely to be unevenly distributed. On the one hand, the service sector is likely to gain from advancements in AI. On the other hand, households will suffer from the deterioration of the labour market, while the industrial sector will face penalties from reduced competitiveness and increased competition from China. Disinflation is expected to progress gradually, which will restrict the BoE's ability to ease monetary policy. The policy mix will be more accommodative, with part of the fiscal consolidation effort postponed until the end of the decade
The Japanese economy is caught between a rock and a hard place. Growth has begun to slow towards its potential level. Japan can boast full employment, a buoyant corporate sector and a reduction in its debt-to-GDP ratio. At the same time, inflation repeatedly overshoots the 2% target and real wages are declining, which negatively impacts consumption. US trade policy remains a risk factor, and ongoing structural issues related to weak domestic demand and limited supply in the labour market persist. Finally, long-term interest rates are rising steeply, partly due to expansionary fiscal policy, while the currency continues to depreciate. Faced with this dilemma, the central bank is expected to maintain a gradual rate-hiking approach until it achieves a terminal rate of +1.5% by mid-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 December 15, 2025.
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
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.
