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World Economic Outlook in Spring 2026: Global Economy Confronted with a New Energy Shock

2026-04-07T00:00:00+02:00

The conflict in the Middle East has weighed on the global economic outlook and has heightened uncertainty. Its impact, however, will depend on the duration and intensity, and will differ across countries according to their energy intensity, energy mix and reliance on hydrocarbon imports.

The global growth outlook has nonetheless been revised upward relative to the autumn forecasts, as the impact of US tariff measures has been smaller than previously anticipated. Global growth is expected to reach 3.2% in both 2026 and 2027, following 3.3% in 2025.

Among advanced economies, growth in the United States is expected to pick up slightly in 2026, supported by the past depreciation of the US dollar and the country’s position as a net exporter of oil and natural gas, before moderating in 2027. Growth in the euro area and the United Kingdom is set to slow, as these economies are more exposed to the energy shock, with growth remaining heterogeneous across countries, notably owing to their respective fiscal policy stances.

In major emerging market economies, growth is projected to moderate slightly in 2026 and 2027. The effects of the conflict in the Middle East are expected to differ markedly depending on whether economies are net importers of hydrocarbons (India, China, Türkiye) or net exporters (Brazil).

Global trade growth is set to slow sharply in 2026 (to 2.2%, after 4.3%), reflecting the full materialisation of the US tariff shock and the energy shock caused by the conflict in the Middle East. Global trade growth is then projected to recover to 2.8% in 2027, reaching its pre-pandemic average (2.8% from 2015 to 2019). In particular, trade in AI-related goods is expected to continue to support global trade growth.

These forecasts are highly uncertain, especially for 2027. The impact of the conflict in the Middle East will depend on its duration and intensity, as well as on the public policy responses adopted by other countries (only the measures announced to date have been taken into account). In addition, US trade policy remains a persistent source of uncertainty.

World Economic Outlook in Spring 2025 Growth Amid Global Turbulence

2025-03-20T00:00:00+01:00

The international scenario, set on 21 February, assumes that the United States will double its existing tariffs on imports from the European Union, China, Canada and Mexico from the 2nd quarter of 2025 onwards. Equivalent countermeasures by these trading partners are also assumed to take effect at the same time. The ensuing turbulence is expected to reduce global GDP growth by 0.1 percentage points (pp) in 2025 and by 0.2 pp in 2026. Similarly, world trade is projected to shrink by 0.2 pp in 2025 and by 0.7 pp the following year.

In line with these assumptions, and provided uncertainties around US economic and trade policies resolve quickly, the global economy should still perform fairly robustly, though somewhat weaker than predicted in September 2024. Global GDP is projected to grow at a steady 3.2% in both 2025 and 2026, roughly in line with 2024, and only marginally below the average pace recorded during the 2010s.

Among advanced economies, economic prospects diverge. Growth is expected to remain solid in the United States – if financial stability persists and investment is not excessively dampened by trade policy uncertainties – and in Spain. Germany, however, faces sluggish prospects, weighed down by delays in the emergence of the recently unveiled investment plans’ effects (announced after the forecast cut-off date), while Italy and the United Kingdom are likely to fall in the middle. These differences reflect differing exposure to tariff hikes and varying growth momentum for 2025, established at the end of 2024. By 2026, these disparities are expected to narrow somewhat.

In the major emerging economies, namely China, India, Brazil and Turkey, economic activity is expected to slow down in 2025. China’s performance is expected to be particularly hampered by enduring structural imbalances. For 2026, the trajectory for emerging economies is expected to be closely tied to the course of monetary policy.

Paradoxically, despite tightening trade policies, global trade volumes are set to pick up speed in 2025 and 2026 after two years of subdued momentum. However, this recovery should be partial and notably weaker than anticipated in the previous September forecast (see Chart). Global trade is expected to continue to be driven by emerging economies, and as a result France should experience comparatively modest demand growth.
These forecasts come with substantial risks – primarily emanating from uncertain global trade policy developments: recent tariff announcements by the US administration amplify downside risk significantly with regard to the assumptions adopted.

Review of Public Finance Forecasts for 2023 and 2024

2025-01-20T00:00:00+01:00

The economic and public finance forecasts for 2023 and 2024 were drawn up amid much uncertainty with highly volatile energy prices, a very high inflation rate and unprecedented monetary policy tightening.

For 2023, while real growth was closely aligned with the forecast (0.9% vs 1.0%), high levels of inflation provoked more substantial revisions of nominal growth, that was initially projected at 4.6% in autumn 2022 then at 6.8% a year later, and which ultimately stood at 6.3%. For 2024, real growth, that was first forecast at 1.4%, was revised downwards to 1.1%, and the nominal growth forecast was reduced from 4.0% in autumn 2023 to 3.5% a year later as it was affected by the faster-than-expected fall in inflation.

The 2023 general government deficit was –5.5% of GDP (–5.3% excluding the change of base year for the national accounts by Insee, the National Institute of Statistics and Economic Studies), compared to the projection of –4.9% in autumn 2023. The 2024 deficit figure has not yet been finalised: the most recent official forecasts were for –6.1 % of GDP, following a projection of –4.4% in autumn 2023, that was revised to –5.1% in April 2024. These revisions are significant but not unheard of from a historical standpoint.

In 2023, the spontaneous growth in aggregate taxes and social security contributions, i.e. without factoring in discretionary measures, was much lower than that of nominal growth (2.6% vs 6.3% for nominal GDP), in contrast to 2022 which was an exceptional year. Such a contrast was anticipated as early as July 2022 but its scale was much larger than projected. Central government expenditure was lower than forecast unlike local authority expenditure.

In 2024, revenue from aggregate taxes and social security contributions was subject to major reassessments due to unexpected events in 2023 that were heightened by the delayed functioning of corporation tax and income tax. It was also slowed by lower nominal growth in GDP that was less driven by private domestic demand, and which had an impact on VAT revenue. In addition, there was a surprisingly high level of local authority expenditure whilst central government expenditure is expected to be lower than provided for in the 2024 Initial Budget Act due to management measures introduced during 2024.

Update

Following the publication by Insee, the National Institute of Statistics and Economic Studies, of the general government accounts, the 2024 general government deficit was ultimately −5.8%, that is to say 0.3 points of GDP more than the projection used in the 2025 Budget Bill and on the basis of which this edition of TrésorEconomics was produced in January 2025.

Revisions constitute an overall improvement of roughly €9.5bn and essentially concern:

• local authority expenditure (+€6.5bn), which turned out to be lower than expected when the 2025 Budget Bill was being prepared, due to a slowdown in this local expenditure starting in autumn 2024. For instance, local authorities’ investment expenditure rose 7.6% in 2024 compared to the 13.2% increase forecast in the 2025 Budget Bill, which was based on the latest accounting data from summer 2024. Operating expenses rose by 3.5% but this was still significantly less than the 4.6% projected in October 2024.

• central government expenditure (up €3.4bn), was less than forecast in autumn 2024 owing to a budget outturn that was even lower than estimated in the Initial Budget Act.

• the 2023 deficit was also revised to −5.4% of GDP, i.e. up 0.1 points compared to the provisional account published by Insee in May 2024.

Table 1 relating to the revision of the general government balance in 2023 and 2024 between the budget bills for 2024 and 2025 has been updated as follows :

World Economic Outlook in Autumn 2024: Monetary Easing and Geopolitical Tensions

2024-09-19T00:00:00+02:00

Global growth is expected to reach 3.2% in 2024, a similar rate to 2023, before increasing to 3.4% in 2025. This outlook is a slight improvement on forecasts released in spring 2024. In 2025, global activity is anticipated to grow at the same pace as in the second half of the 2010s, supported by monetary policy easing and strong performances in emerging countries.

Growth is forecast to remain uneven across advanced economies. In 2024, activity is expected to be particularly robust in the United States and Spain, more moderate in Italy and the United Kingdom and flat in Germany. These advanced economies are experiencing different levels of growth due to disparities in consumption patterns and export performance. Growth rates are expected to converge in 2025, with an acceleration of activity in the euro area and a slight slowdown in the United States, primarily due to a weakening of household consumption.

Although still strong, activity in the major emerging economies – China, India, Brazil and Turkey – is projected to slow compared with 2023, particularly in China where structural imbalances are likely to continue to weigh on activity.

Following a contraction in 2023, global trade is anticipated to recover in 2024 and accelerate in 2025. Global trade is expected to be driven primarily by emerging economies and the United States, resulting in slower growth in global demand for French exports (see Chart).

Global activity could nonetheless be impacted by an escalation of geopolitical tensions, which are the main risks surrounding this scenario.

World Economic Outlook in Spring 2024 Moderate and Uneven Growth

2024-03-19T00:00:00+01:00

Global growth is projected at 3.1% in 2024, mirroring the pace set in 2023, with a slight uptick expected in 2025 to 3.2%. This outlook marks a modest improvement over previous forecasts from autumn 2023. Despite easing production constraints and a confirmed inflationary pullback, the global economy remains shackled by the lingering effects of monetary tightening and geopolitical uncertainties. The global economy’s growth trajectory, therefore, slightly lags behind the late 2010s average.

Growth in advanced economies is anticipated to remain subdued, with significant disparities among countries. In 2024, economic activity is expected to be robust in the United States and Spain but sluggish in other major advanced economies like the United Kingdom and Germany. By 2025, growth rates are anticipated to converge, driven by an acceleration in the euro area and a slowdown in the United States, assuming a gradual return of the savings rate to its historical average.

Major emerging economies like India, Turkey and Brazil should see a slowdown in 2024, followed by a rebound in 2025. China’s economy is projected to continue slowing, hampered by its failure to pivot its growth model towards domestic demand.

After a decline in 2023, global trade is expected to recover in 2024 and 2025. However, the global demand for French exports is predicted to be less robust than international trade. This reflects the more sluggish activity in the euro area, which is expected to rebound modestly in 2024, before accelerating in 2025 (see Chart on this page).

Geopolitical uncertainties, the timing and magnitude of key rate cuts, and shifts in consumer behaviour emerge as the primary risks surrounding this scenario.

World Economic Outlook in Autumn 2023: The Economy is Holding Out Against Rising Interest Rates

2023-09-12T00:00:00+02:00

Global growth is expected to slow to 3.0% in 2023, down from 3.5% in 2022. This is primarily due to the tightening of monetary policy to cut inflation. In 2024, the world economy should grow at the same pace (3.0%) which will still be below its pre-COVID average, as the continuing slowdown in advanced countries is being offset by more robust growth in certain emerging ones.

In advanced economies, economic activity held up better than projected during the first half of 2023. In Europe, the supply of energy this winter has been secured and the supply-chain problems facing businesses have eased. The slowdown in growth in 2023 and 2024 is chiefly the result of monetary tightening and its effect on investment. Each country’s growth path is also contingent on its residual catch-up capabilities following the COVID-19 pandemic, especially as regards consumption, which are greater in the euro area than in the United States, and on the extent of its exposure to world trade which is putting a drag on Germany in particular.

In emerging economies, growth is set to remain vibrant overall in 2023 but could show the first signs that it is running out of steam. As an example, China should experience a more limited recovery (+5.0%) than first forecast, due to the weak upturn in consumption and little support from the authorities against the backdrop of the real estate crisis. In 2024, it is estimated that most emerging economies will benefit from a reduction in inflationary pressure and the relaxing of monetary policies.

It is projected that world trade will slow significantly in 2023 in the wake of the severe contraction in trade during winter 2022-2023, before returning to normal levels in 2024. World demand for French exports (see Chart) should fall slightly in 2023 due to lower imports in advanced countries before bouncing back in 2024, driven by faster growth in the euro area.

The main risks to this scenario are changes to inflation and the effect of monetary policy on economic activity and on the financial sector.

Public Deficit on Target in 2022 Despite the Energy Crisis

2023-07-28T00:00:00+02:00

The 2022 public deficit published by the National Institute of Statistics and Economic Studies (INSEE) on 31 May 2023 stood at 4.7% of GDP. This figure is close to the 5.0% of GDP target set out in the 2022 Budget Bill, as revised on 22 October 2021, and upheld in the two 2022 Supplementary Budget Acts.

However, an imported inflation shock of more than 4 percentage points in 2022 had a strong impact on revenues and expenditure through several channels.

Spontaneous growth of taxes and social security contributions outstripped GDP growth by a wide margin. This major stylised fact was incorporated into the forecasts in the first 2022 Supplementary Budget Bill in July 2022. It stemmed primarily from the components of growth, the strength of wage growth and the large increase in taxable corporate profits in 2021, which has a lagged impact on government revenues.

The inflation shock affected expenditure in two main ways: (i) the indexation of certain expenditure; (ii) the measures implemented since the end of 2021 to protect businesses and households from inflation.

In the fourth quarter of 2021, it was impossible for the Budget Bill to foresee the scale of the energy shock or the measures that would be introduced to support households and businesses. However, the capacity for rapid revisions of forecasts to allow proportionate discretionary tax measures and resolute commitments to the deficit target made it possible to attain a deficit that was close to the original target, despite the shocks affecting revenue and expenditure (see Chart).