Twice a year, BNP Paribas Economic Research invites you to take stock of the global economic situation at a dedicated conference. For the December 2025 edition, the team has chosen to review the past year and present its outlook for 2026 with Jean Lemierre, Chairman of the Board of Directors of BNP Paribas.
Notwithstanding the new US economic policy, which is highly interventionist in terms of trade policy and conflictual, with the longest shutdown in history, the watchword for 2025 was the resilience of growth performance. 2026 should start under the same auspices, with the Trump administration pursuing its agenda, the key elements of which are the renewal of the Fed governor and the risk of the Fed losing its independence. In Europe, the challenges are significant, with a substantial political agenda, including the implementation of Rearm EU, but not limited to that. In a still uncertain environment, we nevertheless believe that growth should return, despite an increasing competition from China
In the major advanced economies, public deficits remain high, particularly in the United States, the United Kingdom and France. Interest expenditures are expected to rise in countries where they are currently low – Germany, Japan and France – and stabilise at a high level in countries where they are currently higher – Spain and Italy – without, however, increasing. By 2030, according to our forecasts, the dynamics of the public debt-to-GDP ratio would reflect differences in public deficit scenarios.
The US primary deficit is expected to narrow in 2025 and stabilise at around 1.0–1.5% of GDP in the coming years thanks to higher customs revenues.
Germany's primary deficit is expected to widen over the next two years as a result of the new fiscal strategy, before gradually narrowing between now and 2030.
Despite consolidation, which is set to continue from 2026 until the end of the decade, the primary deficit will remain worse than the stabilising balance. Public debt will therefore increase.
Until 2027, nominal growth (3.2% on average) is expected to remain higher than the apparent interest rate (3.1%) due to an acceleration in real growth (0.9%).
Spain is expected to generate primary surpluses from 2026 onwards.
The primary budget balance has gradually recovered post-COVID, mainly supported by improved growth, but remains high compared to the rest of Europe.
There has been remarkably limited interest in Europe at recent international economic and financial gatherings, as if “Europe’s moment”, as ECB President Lagarde dubbed it back in the Spring, has already passed in the eyes of many. Meanwhile, European media outlets have been indulging in negative narratives about political risks, persistent industrial doldrums, and inability to implement reforms that might preserve Europe’s place in a world increasingly dominated by the US and China. And yet, under the radar, a lot of good things have been happening.
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At a time when central banks are navigating between persistent inflation, economic slowdown, and unprecedented structural challenges, their room for maneuver has never been so closely scrutinized. Should they lower rates to support growth, maintain them to anchor inflation, or raise them in the face of unexpected shocks? Between balancing acts, threats to their independence, and regional divergences, the choices made by central bankers will shape the economy of tomorrow.
The IFO business climate index fell in September to 87.7 from 88.9 in August (-1.2 points month-on-month, a monthly change close to the historical average monthly change of 1.1 points in absolute terms). This deterioration, after eight consecutive months of growth (84.8 in December 2024), particularly affected services. The situation in industry remained stable and more favourable than at the end of 2024, with a gain of around ten points for both current activity and the outlook.
Presidents Trump and Von der Leyen announced yesterday from Scotland that a trade agreement had been reached. Is it a good deal? Political commentators and many editorialists mostly say no. The stock market reaction says yes. Our take: the deal is at the better end of the spectrum of what could realistically be achieved. Importantly, it removes the risk of a trade war escalation in the world’s largest trade relationship, and creates a more predictable environment for firms on both sides of the Atlantic to operate in.
The number of corporate bankruptcies continued to rise in the first quarter of 2025. However, the momentum slowed, and the increase was uneven. Record highs were broken in the United Kingdom, where a slight decline was nevertheless observed. In contrast, the increase remains much more limited in Italy and Germany, where it continues. In France, the figures are high, but the increase has slowed. In terms of business sectors, services, trade, and construction are the most affected, but to varying degrees depending on the country. In contrast, industry appears to be relatively unscathed. An analysis of bank balance sheets, particularly in France, puts the impact of bankruptcies into perspective
The German government has presented its draft budget for 2025, which is expected to be adopted in September. It is a breakaway budget marked by a clear return to public investment and support for business investment, at the cost of a significant increase in debt. This budget is one of the pillars of Germany's new policy, which should have a rapid positive impact on growth.
Many European countries have decided to significantly increase their military spending, led by Germany. Will this effort be conducive to growth? This will depend on whether or not Europe is able to increase its production of military equipment. It will also depend on the possible crowding-out effects (inflation, interest rates) associated with an increase in public debt. The ability of European industry to meet demand (an increase in EU military spending from 2% to 3.5% of GDP) will be decisive. A reallocation of currently underutilised production capacity (mainly in the automotive and intermediate goods sectors) could help to increase production.
The deficit on the trade in goods published by the French Customs authorities on 7 February is likely to have been EUR83 billion for 2024, from EUR100 billion in 2023 (but EUR58 billion in 2019). The improvement in the nominal deficit hides the fall in goods exports. However, the improvement in the balance in volume terms and the strength of services exports are positive factors.
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While in most major advanced economies the year-on-year growth in nominal wages has been back above inflation for a few months now, we can ask ourselves where households’ purchasing power stands compared to its pre-inflationary crisis level. This purchasing power can be measured in two ways: in the broad sense and more accurately, when it is calculated on the basis of the real gross disposable income (GDI) of households; and in a narrower sense, but perhaps more meaningful for households, when it is assessed on the basis of real wages.
Over the past three and a half decades, the world has undergone profound change. From a situation of balance in the early 1990s -the peace dividend, the Great Moderation, globalisation- we have ended up in a world characterised by geopolitical, economic (supply side) and environmental disruption. A distinctive and fascinating characteristic of this new era is the coexistence of abundance (data generation and dissemination, investment needs) and scarcity (shortage of skilled staff given population ageing, difficulty in finding financing). These developments raise important questions
The S&P Global PMI surveys are a key input in the assessment of the cyclical environment. Judging by the manufacturing PMI, many countries have seen a weakening of momentum in the second quarter of 2024 versus the first quarter. However, for most countries, the level of the PMI in June is still higher than in December 2023. Moreover, 17 countries out of 31 still have a PMI of 50 or higher, which reflects ongoing growth in economic activity. Focusing on the Eurozone and using the composite PMI to take into account the important role of services, it is reassuring to see that in June, although dropping from the 52.2 level recorded in May, the composite PMI was still in ‘real GDP growth territory’ at 50.9
Europe is experiencing a losing trend in market share, due to the growth of other producers (Japan in the 1980s, China subsequently). In Germany, it even increased after the Covid-19 pandemic (-0.7 points in 2023 compared to 2019). The German chemical industry has been hit hard by rising energy prices and increasing competition from China and the US. Its automotive industry (which accounted for 17% of its exports in 2023) is suffering directly from Chinese competition.
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)
In this audiobrief, Stéphane Colliac describes France’s trade deficit for 2023 main drivers. In addition to a deficit linked to imports of hydrocarbons and a structural deficit reflecting the country’s de-industrialisation, it is also driven by France’s investment in the needs arising from the ecological and digital transition and the electrification of the car industry.
