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Exploring the global economy and Germany
Exploring the global economy and Germany
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Exploring the global economy and Germany

22/10/2018

This month, our experts, William De Vijlder and Raymond Van der Putten from BNP Paribas Economic Research Department, examine the global economy perspectives and Germany’s economic cycle

Global economy: Ten years after, where are we? 

img_bp2s_william-vijlder_2018-10-19.png

William De Vijlder, BNP Paribas Economic Research Department

Looking at the economic landscape ten years after the global financial crisis of 2008, a mixed picture emerges. In most countries per capita real GDP is higher than before  the crisis and the unemployment rate has moved back to a  level close to or even below the pre-crisis level. However this has required a huge stimulus effort, in particular on the monetary front. Persistent low inflation  has meant that, in the US, rebuilding monetary policy leeway to a sufficient degree has not been warranted whereas in the eurozone this process hasn’t even started. 

Public sector debt hasn’t declined, despite the growth environment and sharply declining interest rates. The build-up of corporate debt in foreign currency in several emerging markets, fueled by an environment of abundant liquidity in developed economies, has increased their sensitivity to spillovers from US policy tightening or a stronger dollar.

In addressing the next recession, when it comes, countercyclical fiscal policy will likely be constrained by high public sector debt rather than by the level of structural budget deficits. It implies that in addition to efforts in strengthening the resilience to economic downturns (structural reform policies) and in avoiding the build-up of imbalances (macroprudential policy), thinking about how to address the next downturn should be high on the agenda. 

To read the full analysis: here

Germany: At a cyclical turning point

img_bp2s_raymond_putten_2018-10-19.pngRaymond Van der Putten, BNP Paribas Economic Research Department

The German economy has arrived at a cyclical turning point. Uncertainty among enterprises has increased sharply according to the dispersion indicator of the German IFO institute. Between May and September, the indicator gained 6.2 points, an increase similar to that during the global financial crisis 2008-09. The growing uncertainty is also picked up by our “Pulse indicator”. Negative surprises were recorded in the business cycle indicators PMI and IFO. Moreover, markets were disappointed about the small increase in consumer confidence. Nevertheless, all these indicators remain close to their recent peak. The composite PMI stood at 55 in September, indicating that activity is still growing at a robust pace. This is in line with our scenario of slowing economic growth to the potential rate, estimated at 1.5%.

To read the full analysis: here

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