Global Economy Report from BNP Paribas: Growth Resilient, Interest Rates Will Rise
BNP Paribas predicts that the global economy is resilient despite crises and will accelerate in 2027, while expecting new interest rate hikes from central banks due to persistent inflation.
BNP Paribas announced that the global economy has managed to remain resilient despite the Iran war, energy shocks, and high interest rates, and that growth will accelerate in 2027 with the support of investments in artificial intelligence and the green transition. However, new interest rate hikes are projected from major central banks such as the Fed and the ECB due to persistent inflation pressures.
Global Economic Resilience and Expectations for 2027
BNP Paribas reported that the global economy has remained much more resilient than expected despite the Iran war and energy shocks. According to the bank's baseline scenario, global growth will accelerate in 2027, particularly in major advanced economies, supported by artificial intelligence investments, the green transition, and defense spending.
The Iran War and Risks in Energy Markets
The factors supporting growth have so far compensated for a significant portion of the negative shock created by the Iran war through energy prices. However, conflicts and traffic uncertainty in the Strait of Hormuz continue to pose downside risks to the global economy. While Brent crude is expected to hover around an average of $80, prices may fluctuate within a wide band.
Persistent Inflation and Peak Expectations
The risk of energy shocks spreading to other areas of the economy and increases in food prices heighten concerns over persistent inflation. Inflation in developed countries is projected to peak at levels between 3.5 and 4 percent between the final quarter of 2026 and the first quarter of 2027, and then approach the 2 percent target toward the end of 2027.
New Interest Rate Hike Signals from Central Banks
Monetary policy needs to be tightened in an environment where strong growth and high inflation persist simultaneously. BNP Paribas expects the Fed, the ECB, the Bank of England, and the Bank of Japan to implement additional interest rate hikes in the upcoming period.
Bond Yields and the Sustainability of Public Debt
Long-term government bond yields have reached their highest levels in recent years. While part of this increase stems from economic growth, bond markets are adopting a more cautious stance regarding the sustainability of public finances.