In the United States, growth is holding up, unemployment remains low and consumer spending shows no sign of slowing. On paper, that should flatter the president’s party ahead of the midterms. Yet, Republicans could lose control of Congress. The rise in the cost of living, which weighs on households far more than macroeconomic aggregates suggest, could be one of the reasons. On top of persistent inflation, rekindled by the war in Iran, there is also a slowdown in wage growth and rising housing costs. The election could hinge on affordability, yet whichever party wins will lack the means to address it. A change in the majority in Congress will nonetheless have an impact on the country’s economy.
China has never exported as much as it does now, and its trade surplus has never been higher. At the same time, its economic growth is slowing, held back by weak domestic demand. The imbalances in China’s growth model, and the external imbalances they give rise to, are therefore continuing to worsen. With Europe taking a tougher line and the United States, with which China shares nothing more than ‘strategic stability’, the standoff looks set to continue. However, the European Union and China would have a great deal to lose from a lasting deterioration in their relationship. It is in the interests of both parties to seek to restore the balance. To this end, it is important to understand Beijing’s objectives and the constraints facing China
The 2022 energy crisis clearly highlighted the issue of electricity prices in Europe – and, more broadly, the issue of energy prices. As a result, European manufacturers’ competitiveness has been severely undermined when compared with the United States and China. By reigniting tensions over electricity prices, the conflict that began in the Middle East in late February 2026 further underscores the continent’s vulnerability to fossil fuel imports, despite the expansion of renewable energy. Faced with an environment of potential sharp and sudden price rises, European governments do not have the same room for manoeuvre.
Seven months after the start of the war in the Middle East, which has led to a sharp rise in oil prices, sub-Saharan Africa is holding up well overall. The deterioration in external accounts and the rise in inflation are more contained than in 2022, during the last oil shock. However, this resilience is fragile and is eroding as the conflict drags on. Furthermore, an exceptional El Niño event could significantly worsen the macroeconomic environment in 2027.
The global economy’s unexpected resilience might have invited the self-congratulation that is a trademark of international official meetings. But policymakers gathered in Bangkok for the 2026 IMF Annual Meetings were wearily aware that “continued resilience cannot be taken for granted”, as noted in the prologue to the closing Chair’s Statement to the International Monetary and Financial Committee meeting. Growth forecasts remain in line with those made a year ago, when interest rates were much lower and no energy shock was in the cards, and even with those made in April, when a short shock was the base case
In 2026, the European economy will not perform better than it did in 2025. At 1.4% (IMF estimate), its growth remains half as fast as in the United States. Still, there are more and more signs that Europe is regaining strength. The energy crisis, which has now been ongoing for eight months, would have caused it to halt in other times. Beneath an apparent sluggish activity, productivity is rebounding, while many sectors are picking up steam.
GDP growth is proving more resilient to shocks than anticipated. Second-quarter figures confirm this trend: despite rising oil prices, growth remains supported by various reflationary forces. At the heart of this cycle lies a clear driver: Artificial Intelligence (AI). Consequently, major global economies are ramping up investment in capital goods.
It was true at midyear, and it remains true this fall: the global economy continues to show remarkable resilience, with tailwinds continuing to prevail in their tug-of-war with headwinds.We believe these tailwinds will persist and ultimately win, leading to an acceleration in growth in 2027, particularly in the largest advanced economies. But there are some downsides to the situation, the tug-of-war remains tough, and risks are numerous. Here is a brief overview of our recently updated economic forecasts and their key messages.
The 2027 budget, adopted by the French Council of Ministers today, calls for a reduction in France’s fiscal deficit to 5% of GDP in 2027 (down from 5.4% in 2026). This is a first step towards the multi-year fiscal consolidation needed to stabilise the public debt-to-GDP ratio. This ratio is expected to rise further in 2027 and until the deficit is reduced to 3% of GDP. Furthermore, given the increase in some expenditures (+0.6 pp of GDP for debt service and defence spending), the projected fiscal effort amounts to 1 pp. Nearly one-third of this effort would come from higher compulsory levies, and two-thirds from curbing government and social spending.
In 2026, the government once again failed to stabilise its public debt-to-GDP ratio due to a significant fiscal deficit and lower-than-usual growth. According to our analysis, this underperformance is due to exceptional factors. Structurally, France can still generate growth that will help the public debt ratio to stabilise, provided that its budget deficit is brought down to approximately 3% of GDP
This month, we are launching Country Risk Profiles, an extension of EcoInsight dedicated to the risk profiles of a selection of countries. The first Country Risk Profile focuses on Vietnam, which continues to benefit from very strong economic growth despite external shocks.
A pillar of the NextGenerationEU programme, the Recovery and Resilience Facility (RRF) will expire on December 31, 2026. As of the end of August 2026, slightly more than three-quarters of the total budget had been disbursed (EUR 440 billion out of EUR 573 billion). Disbursing the remaining quarter (EUR 133 billion) by the end of the year will require a significant increase compared with the historical pace (EUR 90 billion per year). The goal of channeling these funds toward productive investment appears to have been achieved.
As we begin the 2026 financial year, long-term sovereign bond yields are reaching unprecedented highs not seen for decades. Why is this happening? Is it sustainable? What are the implications for the world’s various economies? These are just some of the questions addressed in this new Special Edition video, introduced by Chief Economist Isabelle Mateos y Lago.Drawing on insights from the banking sector and teams specialising in emerging and advanced economies, the economists from Economic Research will explain why the rise in bond yields is problematic.
When economists talk about public debt, they often refer to the ‘sustainability’ of the debt. Hélène Baudchon, deputy chief economist, explains what this means and when a debt trajectory can be considered unsustainable.
The scope for manoeuvre available to fiscal policy depends heavily on the interest rate environment, and this has tightened significantly in recent months.Guillaume Derrien, economist in the advanced economies team, explains where we stand today in the advanced economies, against a backdrop of high debt-to-GDP ratios and moderate growth.
Whilst long-term bond yields in advanced economies rose over the summer, Cynthia Kalasopatan Antoine, economist in the emerging economies team, explains what has been happening in emerging markets during this time.Are public finances stronger in emerging markets than in developed countries? What is the dominant trend when comparing key fiscal indicators?What emerges from a comparison of debt sustainability criteria?
Among emerging markets, Argentina and Türkiye stand out for their particularly high consumer price inflation, currently standing at around 30% year-on-year in both countries. However, the monthly increase rate has fallen sharply – from around 8% in Argentina and 4% in Türkiye on average in 2023 to around 2% for both countries during the summer of 2026. The economic policy strategies adopted by governments and monetary authorities to bring inflation under control are very different. However, their consequences are too, and they are not positive for Argentina.
“Germany is too dependent on the US for its security, on Russia for its energy and on China for its exports.” That was, in essence, Brookings’ Constanze Stelzenmüller’s diagnosis in June 2022, and it was – and is – valid as well for Europe as a whole. But does this dependency also apply to technological and industrial products? The European Commission’s EXternal Vulnerability Index (EXVI) answers that very question, mapping out the EU’s exposure to foreign supply chains.
The Recovery and Resilience Facility, or the so-called RRF, has been drawing heightened attention lately as two deadlines are looming: August 2026 for reform milestones and December 2026 to secure all disbursements. The stakes are high. Countries failing to fulfill the EU’s reform milestones risk losing entitled funds.
For the first time since 2009 (excluding COVID), the GDP of the Gulf Cooperation Council (GCC) is expected to contract this year (-0.8%), whereas pre-conflict forecasts had predicted growth of 4.7%. Far from benefiting from the sharp rise in energy prices triggered by the conflict, the scale of the downturn reflects the severity of a shock that is undermining many of the pillars of the Gulf economies. Nevertheless, the consequences are varying from one country to another, depending on the level of diversification and, above all, on the degree of vulnerability to disruptions in the Strait of Hormuz.
The latest economic news.
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
The independence of the Federal Reserve (Fed) has been challenged by the US administration, but it remains intact. As the Kevin Warsh era begins with the 16-17 June FOMC meeting, the simultaneous strength of inflation and the labour market set the stage – should it persist, as we anticipate – for monetary tightening to start by the end of the year. Yet the turbulence at the end of Jerome Powell’s term is a reminder that central bank independence is not a given. The stakes go beyond price stability alone and extend to the global financial architecture itself.
Out of the spotlight, Europe is quietly preparing to emerge from its post-pandemic underwater years like a nymph turns into a stunning dragonfly. The turmoil of the last year and a half has brought about “Europe’s moment” in more ways than is being recognized. Europe isn’t just emerging as the alternative safe haven of choice. It can count on five powerful boosters: rebounding industrial strength, established services dominance, tech acceleration, a governance sea-change, and favorable geopolitical winds.
