BNP Paribas: economic outlook on the opening of The CubeHouse

At the celebratory opening of The CubeHouse, the new headquarters of BNP Paribas The Netherlands, Chief Economist Isabelle Mateos y Lago gave a keynote on the state of the world economy – one full of challenges but also rich in opportunities.

She depicts an economy that’s resilient in the face of shocks. Despite the pandemic, rapid interest rate hikes, American tariffs and – more recently – the war in Iran, we’re not facing a recession. The US economy is growing at just over 2% with Europe’s at around 1.5%. In the in the economic outlook, it’s inflation that is the biggest concern: it will rise by almost 1 percentage point almost everywhere.

There are three structural shifts taking place on the world’s stage

• Geopolitics: stable rules of the game are disappearing. The world is shifting towards block formation and fierce inter-block competition at exactly a moment in which economies have become powerfully intertwined and interdependent.
• The physical world: climate and geopolitics cause recurring supply-side disruption. Access to raw materials is crucial, geographical proximity is mission-critical, and all this requires investments in infrastructure – in defense and energy but also digital infrastructure. This investment wave leads to structurally higher capital costs for the long foreseeable future.
• Technology: AI is transforming every single sector and will produce both winners and losers. In the financial sector, tokenization will become dominant within eight years, according to the ECB.

Mateos y Lago sees that a realistic policy is being used on many fronts as a counterbalance to these shifts. Unlike in 2020-2022, governments are keeping a tight grip on spending; central banks take balanced measures, and industrial policy focuses on strategic autonomy to protect sovereign and regional resilience and economies – with Europe making progress through a group of countries taking the lead.

Conclusion: We’re in a stressful but promising period.

For more economic outlooks and reports by Isabelle and her team, visit BNP Paribas’ economic research portal.