Indonesia is facing two external shocks: rising energy prices and capital outflows. The decline in governance quality has indeed impacted foreign investor confidence. Assuming that the conflict in the Middle East subsides, pressures on external accounts and energy subsidy costs are expected to ease. However, oil prices are expected to remain consistently above their early-2026 levels, perpetuating the risk of fiscal slippage. Investors remain cautious, and rupiah volatility is high.
Despite the energy shock, Poland’s economic growth is expected to remain robust and could even accelerate slightly in 2026. This growth is being driven by a recovery in investment, while consumption, although slowing, will continue to be one of its main pillars. Inflation remains moderate despite rising fuel prices and is expected to stay within the Central Bank’s target range. The external accounts, meanwhile, are very solid and can accommodate for the rise in energy costs. However, the trajectory of public debt is a cause for concern, particularly given that the government’s lack of a qualified majority is hampering fiscal consolidation.
Recent political tensions are once again drawing attention to Romania. The next government’s priority will be to further consolidate public finances; otherwise, the public debt-to-GDP ratio will continue to deteriorate. In addition, Romania appears to be the Central European country most adversely affected by the energy shock, although the situation is still manageable. Economic growth has been sluggish since 2024 and is not expected to improve in 2026. Inflation has now exceeded 10%, but it is expected to ease from September as the effects of the VAT rate hike subside. Monetary authorities are expected to adopt a cautious approach in the short term
Turkish growth has slowed significantly since Q4 2025, and the oil shock since March has led to a significant erosion of foreign exchange reserves, a more pronounced depreciation in the lira than in other emerging-market currencies, and pressure on domestic bond yields. The risk of disruptions to hydrocarbon and fertilizer supplies is limited. However, the revision of official inflation forecasts, the subsequent tightening of monetary policy, and warnings of the finance minister about potential budget slippage have dampened investor sentiment, which is further unsettled by the AKP’s strategy of systematically sidelining potential rivals in the presidential elections. There are often recurring financial tensions in Türkiye
The Brazilian economy continues to withstand an ultra-restrictive monetary policy stance. In an election year, fiscal policy has become increasingly active to help cushion the impact of high interest rates and mitigate the effects of the oil shock on households' purchasing power. The resilience of economic activity comes at the cost of slower disinflation and a shift in the fiscal burden towards public banks. The policy mix—protective fiscal policy versus restrictive monetary policy—complicates the adjustments of prices, public finances, and inflation expectations amid more frequent supply shocks. The oil price shock has helped strengthen both external accounts and the reais
The presidential election on 21 June 2026 was won by Abelardo de la Espriella, an outsider who distances himself from the traditional figures of the Colombian right. His programme, which represents a total departure from that of the outgoing government, draws clear inspiration from the economic liberalisation advocated by Argentine President Javier Milei and the security measures of Salvadoran President Nayib Bukele. His accession to power in August therefore heralds major shifts in economic and fiscal policy, as well as in the fight against drug trafficking. Although economic growth has remained largely unaffected by the closure of the Strait of Hormuz, it is expected to slow in 2026, primarily due to more restrictive monetary and fiscal policies
Mexico’s economic outlook remains modest. It is characterised by a slowdown in private consumption and investment still held back by uncertainty and a lack of new infrastructure projects. Exports, the main drivers of economic activity, have benefited from the US regionalisation strategy, but the USMCA renegotiation is introducing new constraints. The US is tightening the conditions for accessing its market, threatening the competitiveness of the manufacturing sector, which remains dependent on Asian inputs. At the same time, rising public debt, continued support for Pemex and falling oil revenues are drastically reducing fiscal margins, exacerbating the country’s economic challenges.
Saudi Arabia may not be the Gulf economy most vulnerable to the conflict in Iran, but it is by no means unaffected. This year’s growth forecasts have been significantly downgraded due to the decline in oil production. Nevertheless, excluding hydrocarbons, economic activity remains resilient. Crucially, the country has been able to capture some of the trade flows blocked in the Strait of Hormuz thanks to its infrastructure on the Red Sea. In the short term, the rise in oil exports will improve its external accounts. On the other hand, the recovery in public finances will be less pronounced due to soaring budgetary expenditures. However, there is still ample fiscal headroom. Public debt levels are moderate and the conflict has not undermined creditors’ confidence
The impact of the war in Iran and the energy crisis on the Egyptian economy are currently limited. The economy has benefited from macroeconomic fundamentals strengthened by international support and the increased credibility of its economic policy. The momentum for economic recovery and disinflation, which began in 2025, remains intact. The main source of vulnerability – foreign exchange liquidity – has only slightly deteriorated, supported by increased flexibility in exchange rates. Nevertheless, while the Egyptian economy’s vulnerability to external shocks is diminishing, it remains high, particularly due to the growing imbalance in the energy sector and dependence on volatile capital flows
The concept of ‘emerging economies’ as opposed to advanced economies is multifaceted and often poorly defined. The simplest and most commonly used indicator is GDP per capita, on which the classification used by international financial institutions (IFIs) is largely based
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In advanced economies, inflation continues to rise due to the energy shock, but there are still no signs of a wage-price spiral. According to survey data, price pressure indicators edged higher with the exception of Japan. In emerging economies, inflation increased moderately due to the energy shock. As for commodity prices, they have been falling since the announcement of the agreement protocol between the United States and Iran.
The energy shock triggered by the war in Iran is reviving inflation, but to a lesser extent than in 2022. May data supports this view. However, the situation still needs to be monitored closely. The U.S.-Iran Memorandum of Understanding provides some relief, yet many uncertainties remain. A return to normal conditions on the oil markets will take time, and the current easing of oil prices must prove durable. Inflation—driven by the lagged effects of tensions on oil, commodities and value chains—is expected to stay elevated for several more months. This will justify a more restrictive stance from central banks.
In May 2026, the average CPI inflation rate for the main emerging economies was broadly stable at 4.7% y/y after 4.8% in April. The shock is still contained compared to 2022 due to limited spillover to agricultural and food prices. Manufacturers’ opinion on the trend in input & output prices has stopped deteriorating but remains higher than in 2022.
In Colombia, the right-wing populist candidate Abelardo de la Espriella won the second round of the presidential election on Sunday, 21 June, which achieved a record voter turnout of 63.4%. Preliminary estimates indicate that he secured 49.7% of the votes, narrowly surpassing left-wing candidate Iván Cepeda, who garnered 48.7% and represented a continuation of the policies of outgoing President Gustavo Petro (2022-2026). This election marks a significant shift to the right for the country, following the lead of Argentina and Chile, now governed by President Javier Milei (since December 2023) and President Antonio Kast (since March 2026), respectively
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Inflation continues to rise globally, in both advanced and emerging economies, and remains largely driven by energy prices.
Will the same causes produce the same effects? In other words, will the war in Iran and the resulting surge in oil and gas prices lead to an inflationary shock comparable to that seen in 2022? Will their negative effects on growth be the same as those for the war in Ukraine and the subsequent energy shock? Although there are similarities, there are many uncertainties.
In April 2026, the inflationary impact of the oil price shock is spreading as the average CPI inflation rate for the main emerging economies reached 4.8% year-on-year, compared with 3.9% in February. The shock is still contained compared to 2022 due to limited spillover to agricultural and food prices. However, manufacturers’ opinion on the trend in input & output prices have deteriorated significantly. The contagion of oil and gas prices to fertiliser and oil-derived input prices is being felt more acutely.
China’s rise is undermining major sectors of European industry. However, as the German economy illustrates most clearly, Europe is shifting, driven by investment cycles in defence, electrification and artificial intelligence. It is redirecting its exports and managing to maintain strong positions, particularly in high value-added services, where exports to China are trending upwards. Yet this repositioning remains fragile and could be hampered by the economic costs of the conflict in the Middle East. To consolidate its positions, Europe must accelerate the unification of its internal market and do more to strengthen its industrial policy. This is the aim of the ‘One Europe, One Market’ agenda.
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 15th Five-Year Plan, which outlines the roadmap for the Chinese economy from 2026 to 2030, does not signify a major shift in direction but rather continues on the path of the previous plan. It confirms, or rather reinforces, China’s development strategy based on asserting its export, industrial and technological power. Rather than focusing on rebalancing the growth model and boosting domestic consumption, Beijing is prioritising industry and innovation, seeking to increase its dominance in critical sectors and guarantee its ‘national security’
Due to the military interventions by the United States and Israel in Iran and Lebanon, emerging economies are experiencing financial strains: rising risk premiums, depreciation of their currencies against the dollar, and a decline in central banks’ foreign exchange reserves. As is often the case, Türkiye is once again in the spotlight due to the sharp fall in the reserves of its central bank.
