The energy-led rise in inflation remains contained. But pressures are building and consumer and services confidence is suffering.
Despite the war and energy shocks unfolding in parallel to the Meetings, finance officials, central bankers and other delegates took the situation with a poise that contrasted with the sense of shock that followed Liberation Day. Unable to predict with any degree of confidence how the war would evolve, and hence how large the economic damage would be, delegates focused more than usual on what lies beyond the near-term outlook: regime changes in geopolitics, economics and markets; how to explain and preserve recent resilience; and the multiple ongoing re-wirings of the fabric of the global economy and financial markets. Here are some personal key takeaways.
In Hungary, Péter Magyar’s pro-European centre-right party won a landslide victory in the general election held on 12 April. According to the latest official estimates, Tisza is reported to have secured a supermajority, which would give it significant room for manoeuvre to drive through institutional reforms. The new government will nevertheless face several challenges, including the release of European funds essential for revitalising the economy, and the consolidation of public finances. Meanwhile, the partnership with China in the field of electric mobility remains a priority.
This week, Washington DC will host two gatherings that should be important in their own right, and yet are unlikely to be: one is the Spring Meetings of the International Monetary Fund (IMF) and World Bank (WB), which brings into town thousands of top finance and central banking officials as well as private sector delegates from the financial sector and civil society; the other is the peace negotiations between Israel and Lebanon. The former is traditionally an opportunity to take stock and send a combination of reassuring messages to markets and stern admonitions to policymakers. The latter could have been history-making just for taking place. Yet both are certain to be overshadowed by developments in the Persian Gulf and US-Iran talks
Most developed countries are ageing rapidly. According to the United Nations population database, the proportion of people aged 65 and over in the group of “more developed countries” is projected to rise from 21.5% in 2026 to 32.3% by 2100. There are however significant differences between countries. Such increases pose a threat to social security systems. Without any specific reforms, pension and healthcare spending will rise while contributions from the shrinking working-age population will decline. Which countries are financially most vulnerable to ageing? We analysed this question for 16 developed countries using five ratios in our ageing vulnerability index.
According to INSEE, the French public deficit in 2025 improved by 0.7pp at 5.1% of GDP (the government targeted 5.4%). This improvement is due to the rebound in the rate of compulsory levies (CL). The public debt ratio is also below projections (115.6% versus 116.2%), although its increase in 2025 was as expected (+3pp). This evolution, along with the repercussions of the shock in Iran, particularly regarding interest rates, suggest to stick with fiscal consolidation efforts in 2026. The deficit is expected to benefit from a better starting point, the anticipated increase in the CL included in the 2026 budget, and the likely favourable impact on revenue from higher nominal growth in 2026
During her hearing on 18 March 2026 before the Committee on Economic and Monetary Affairs of the European Parliament, Claudia Buch (Chair of the Supervisory Board of the European Central Bank) highlighted the absence of decline in the quality of bank assets and the stability of non-performing loan ratios. These ratios are a good indirect indicator of the financial health of borrowing corporations in the European Union (EU), particularly in the manufacturing sector. When viewed from this perspective, the proportion of firms in this sector facing severe financial difficulties appears to be lower at the start of 2026 than at the start of 2022. This suggests, by extension, that these firms are in better financial health and have a greater ability to absorb shocks
Following the announcement on 4 March 2025 of a joint plan to invest EUR 800 billion in defence within the European Union (EU) by 2030, Member States have been gearing up for action. One year on, the initial assessment is fairly positive. Promises are being kept and, according to our estimates, EU countries spent nearly EUR 400 billion in 2025, slightly more than expected. Germany, the countries of Northern Europe and those that spent the least (including Spain) have agreed to a significant increase in spending. They are therefore aligning with the countries of Central and Eastern Europe that had already implemented this effort (in particular Poland and the Baltic states). Investment represents a growing share of expenditure and R&D is increasing rapidly
Between rising interest rates, an ageing population and massive rearmament needs, the budgetary equation for advanced economies is becoming increasingly complex. Why is debt continuing to grow in the United States and France, while it is falling in Spain and Italy? How does Germany intend to finance its infrastructure and defence without jeopardising its budgetary stability?In this new episode of En Eco dans le texte, Stéphane Colliac, Marianne Mueller and Benjamin Puiseux explain the inner workings of public debt. They also explore reasons for optimism: from the impact of artificial intelligence on productivity to reforms in the employment rate of senior citizens
Ageing populations, rising long-term interest rates and increased defence spending are adding to the difficulties for public finances across the OECD. While fiscal consolidation – which can be measured by an improvement of the primary balance by at least 3% of GDP in 4 years – is essential for several member states, this is easier said than done. What can we learn from analysing 20 years of European public finance? Historical examples from EU countries show that expenditure-led consolidation can be an effective approach and tends to support stronger growth after it is completed.
Europe is getting better and better. It has not been spared shocks, notably the war in Ukraine – its impact on energy prices is largely responsible for German stagnation – and political uncertainty in France, which affected French GDP growth in 2025. But Europe is overcoming these difficulties. GDP Growth in the Eurozone proved robust, at 1.5%, and 2026 should be a positive year, even more than in 2025. Industry has emerged from recession, buoyed by defence, aeronautics and AI, while households are showing purchasing intentions not seen since February 2022. All these factors will help Europe to continue building its strategic autonomy. The context is favourable and Europe is becoming increasingly credible in the eyes of investors.
Sub-Saharan Africa has gone through 5 years of shocks that have weakened its public finances between 2020 and 2024. Over this period, public debt has risen rapidly, fuelling concerns across the region.
In 2025, emerging economies successfully navigated various shocks, including US protectionism, conflicts, and geopolitical tensions, largely due to Chinese exports, monetary easing, and ongoing disinflation against a backdrop of falling oil prices. Overall, financing conditions remained favorable, at least during the first half of the year, with most currencies appreciating against the dollar. In addition, macroeconomic imbalances, particularly external ones, were kept in check. For 2026, a slowdown in growth is the most likely scenario, but stabilization or even consolidation cannot be ruled out. Asia is expected to remain the most dynamic region.
2026 could prove to be just as turbulent and resilient as 2025 in economic terms. The use of the term “turbulent” is justified considering the geopolitical developments and tensions that have already marked the beginning of this year, and which constitute an additional source of uncertainty (the immediate short-term economic impact is expected to be minimal, with low oil prices offsetting the negative effect of increased uncertainty). The second term reflects a crucial aspect of our baseline scenario. However, it remains to be seen whether the global economy, and advanced economies in particular (the focus of this editorial), will manage to navigate the challenges ahead as they did in 2025
Most years fade into the background as soon as a new one starts. Not 2025: a year of epochal shifts, in which the macroeconomy was the dog that did not bark. What to expect in 2026? The shocks of 2025 will not be undone, but neither will they be repeated. Instead, their effects will work their way through the system, in ways that are unlikely to be linear and smooth. In the baseline scenario, the macroeconomy will remain a dog that does not bark, either out of alarm or joy. However, there are a few potential path changers to look out for. Chances are, then, that 2026 will not feel any smoother on a day-to-day basis than its predecessor. However, that will not mean good outcomes cannot be reached for those who keep their heads.
2025 saw a renewed appetite among European consumers for electric cars. This enthusiasm comes after a lacklustre 2024, when registrations stagnated following the late 2023 announcement regarding the reduction of budgetary support in France and the complete withdrawal of such support in Germany. Yet, numerous studies, including the joint report by Pisani-Ferry and Mahfouz, had deemed these subsidies crucial.
In today’s discussion, we delve into the public finances of emerging economies in 2025, based on an exclusive analysis of our most recent EcoPerspectives issue focused on these economies. With robust but slowing growth, rising public debt and limited fiscal flexibility, what challenges and opportunities lie ahead for these countries?
Since the pandemic, household consumption has evolved very differently between the Eurozone and the United States. In Europe, weak growth in real gross disposable income, moderating wealth effects, and rising real interest rates have dampened demand. In the United States, however, consumption has exceeded what fundamentals would suggest, buoyed by the housing wealth effect and fiscal stimulus. This divergence is likely to narrow, however, with the Eurozone gradually correcting its underperformance, albeit unevenly across countries, while the United States is expected to see an end to its outperformance, without falling into underperformance.
This is my last contribution to Ecoweek before my retirement within a couple of weeks. Looking back at a career in banking and asset management that spans several decades, my main conclusion is that history repeats itself, at least to some degree. When I started in banking in 1987, a hotly debated topic was whether Wall Street had become massively overvalued and my first task was to focus on the sustainability of Belgian public debt. Ironically, today the valuation of Wall Street is again a topic of intense debate and many advanced economies struggle to stabilize their elevated public debt ratio. This reminds us that in the long run, budgetary discipline is of paramount importance. Otherwise, governments will have to confront increasingly difficult choices
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.
