The Main recent economic news.
Equity indices, Currencies & commodities, and Bond markets.
The two most recent shocks to emerging countries (the 2022-2023 tightening of US monetary policy, and the election of Donald Trump at the end of 2024) have not affected their financing conditions. However, supporting factors have weakened since the second half of last year. In the coming months, financing conditions could tighten as a result of rising geopolitical risk in particular. However, the adverse impact on emerging economies should be viewed in perspective, given the low transmission of the two recent external shocks to interest rates. Although exchange rates have continued to depreciate against the dollar, the vulnerability of debt to foreign exchange risk is moderate or low for households and non-financial companies
Peace talks have started. We do not know how soon or exactly where they will land. But things are moving fast. While much of the focus is, rightly, on the unexpectedly daunting geostrategic challenges, it’s not too soon to start mapping out the key economic implications for Europe.
While French growth reached 1.1% in 2023 and 2024, uncertainties, particularly of a political nature, are expected to drive growth slightly down in 2025 (0.7% according to our forecasts). The difference can be explained primarily by the weak growth carry-over after Q4 2024 and Q1 2025. However, we are probably over the worst and growth is expected to strengthen from Q2 onwards. In fact, implementation of the 2025 budget should restore confidence and allow an increase in public consumption compared to Q1 (when it was penalised by renewal of the 2024 budget). Basically, we think that the momentum of the transition to services - accompanied by strong business creations - has not been interrupted. Accordingly, the fundamentals of French growth are preserved.
Who's next? As soon as he became the 47th President of the United States, Donald J. Trump drew the weapon of tariffs, “the most beautiful word in the dictionary”, as he put it. Mexico, Canada and China were the first to be hit, while the European Union (EU) was explicitly targeted.
While the Fed lowered its target rate by 100 bps from 18 September 2024, bond yields rose by around 80 bps (as at 7/2/2025). This rare divergence is reminiscent of an inverse version of the ‘Greenspan conundrum’ (2004–2005): during this episode, which spread to Europe, the rise in short-term rates had little effect on long-term rates. What are the reasons for these contrary movements between short- and long-term rates, and what might the implications be?
Since taking office, President Trump has confirmed his threats to raise tariffs, but fears of universal and widespread application have abated somewhat. He will decide whether to carry out his threats once an audit of the United States' trade relations with all its trading partners has been completed, which should be by the beginning of April. Between now and then, and even over 2025 as a whole, the divergence in the trajectory of world trade between advanced countries and emerging and developing countries (EMDs) is set to increase. Trade between EMDs is expected to grow significantly faster in 2025 (5%) than during the 2012-2018 pre-COVID period (+3.9% per annum on average), whereas it will be the opposite for advanced countries
After a good start to the year, Chinese economic growth will slow down in 2025 due to still weak domestic demand and the effects of the upcoming protectionist shock on exports. China has tools at its disposal to respond to President Trump’s new tariff plans, even though its room for manoeuvre to offset the effects of rising tariff barriers with a depreciation of the yuan and a drop in export prices has narrowed compared to 2018. The authorities will continue to ease their monetary and fiscal policies in the short term to stimulate activity and boost private consumption, and try to support a rebalancing of China’s economic growth model.
Economic growth forecasts for the fiscal year 2024/2025, which ends on 31 March, have been revised significantly downwards. The outlook for the next three years could also be downgraded unless the government and the private sector significantly increase their investment. However, the international economic climate is not conducive to either domestic or foreign investment, even if the direct impact of a potential increase in US tariffs on Indian economic growth would be limited. The recent downward pressure on emerging currencies has not spared the Indian rupee, and the depreciation trend is likely to continue, especially as the new Governor of the Central Bank seems to be focusing on supporting economic growth rather than currency stability.
South Korea's economic growth slowed throughout 2024, with limited prospects for a rebound. The political crisis and unprecedented government instability in the country are likely to result in a marked slowdown in domestic demand. The outlook for the export sector (mainly semiconductors) will depend in part on the trade policy adopted by the new US administration. South Korea is not directly targeted by tariff measures for the time being, but the resulting upheaval in value chains will adversely affect exports. Economic policy will remain accommodative: the Central Bank and the interim government have already proposed support measures, but the stimulus will not be enough to significantly boost growth, which is likely to continue to slow in 2025.
GDP growth remained robust in 2024 and the outlook for 2025 is favourable. Consumer spending is expected to remain strong, but investment is expected to slow. Monetary easing by the central bank is expected to be constrained by pressures on the rupiah, while real interest rates - already high - have risen further. In fiscal terms, the government is expected to favour its social policy over capital expenditure. This will impact economic growth in the short and medium term. Exports are expected to suffer from the Chinese economic slowdown. In addition, although modest, the direct impact of a potential increase in US tariffs could also have a negative impact on the Indonesian economy.
The Vietnamese economy posted strong growth of 7.1% in 2024. The conditions for this success could continue on into 2025: the export sector is benefiting from buoyant global demand for electronic goods and is continuing to increase its production capacities thanks to FDI; the property sector is recovering from the 2022-2023 crisis; private consumption is likely to increase further; and the government has some room for manoeuvre for increasing its spending and investment. However, Vietnam’s economic outlook is also exposed to high downside risks. Firstly, a strong dollar and unchanged interest rates in the US pose a risk of capital outflows, and pressures on the dong and external liquidity would then constrain monetary policy
Poland stands out from neighbouring countries with an outperformance of its economy. It has also experienced an uninterrupted positive GDP growth since 1992, with the exception of 2020. Growth prospects are strong in 2025 and 2026, due to the expected rebound in public investment and despite the uncertainties related to the presidential elections in May 2025. Inflation is accelerating once again this year and is not expected to converge towards its target before 2026. Monetary authorities are likely to maintain their status quo for the time being, and then move towards policy easing later in the year. Regarding the impact of "Trump 2.0," Poland has limited direct trade exposure to the US, but remains vulnerable to the rise of protectionism.
The economy ended 2024 in a state of overheating (reacceleration of inflation, tensions in the labour market) – a situation fueled, in large part, by the prolonged extension of public support measures. Throughout the year, the fiscal trajectory has steadily undermined market confidence – eventually culminating in significant capital outflows in December. The resulting pressures on equities, interest rates and the exchange rate, prompted the Central Bank to take defensive measures to stabilize the BRL. In 2025, a gradual slowdown in economic activity appears inevitable, as domestic demand will be constrained by fiscal adjustment measures, tighter credit conditions, persistent inflation and a deteriorating business climate
The Mexican economy is slowing down and the short-term outlook is not favourable. The constitutional reforms enacted in recent months (including the reform of the judicial system) are damaging the institutional framework and deterring investment. In addition, consumption could be hit hard by the fiscal consolidation plan announced by the government. Above all, Mexico is one of the most vulnerable countries to the US economic policy change. The new migration measures could significantly reduce money transfers from foreign workers, which significantly support the country's growth. The expected customs tariffs applied would also have severe consequences for the Mexican economy in terms of growth and inflation.
Argentina's economy is back on track. Since mid-2024, growth has returned and inflation has slowed significantly. There has been a high social cost to the severe cuts in public spending, but the government budget is in surplus for the first time since 2010. With the recessionary impact of fiscal austerity, the current account balance has turned into a surplus as well. But exports have also been rebounded , despite low prices of agricultural commodities. For the time being, the central bank's foreign exchange reserves are still insufficient for exchange controls to be lifted before the mid-term elections in October. The renewal of an agreement with the IMF is already a prerequisite
Economic growth is being restrained by OPEC+ restricting oil production. Excluding hydrocarbons, activity is holding up well however, driven by consumption and the government’s intensive investment policy under the Vision 2030 economic diversification programme. This solidity comes with large budget deficits, and now also current account deficits, which are requiring record-high debt issuance. Fortunately, the country still has comfortable financial leeway. However, Donald Trump's return to the White House could have a deep impact on a number of areas.
The massive support of international donors has restored a degree of optimism to the Egyptian economic outlook. The depreciation of the exchange rate is under control and inflation is clearly on a downward trajectory, which should make it possible to ease monetary policy. Nevertheless, structural problems remain and will only be resolved very gradually, both in terms of public finances and external accounts. The policies of the new US administration should have a limited impact on Egypt's external accounts.
