I spent the last week at the Annual Meetings of the IMF and World Bank in Bangkok attending a wide variety of meetings. The ability of the global economy to withstand shocks was a key theme of the meetings, and most expected this to continue. Worries about the risks remained, from the sustainability of the AI capex cycle, to geopolitics, rising interest rates and sovereign debt. AI capex would remain strong, but there was a general agreement that the scale of capex did not justify the revenues that would be generated. Although flagged as a risk, geopolitics may now be an underrated one and turn out to be ‘the boy who cried wolf’. Most saw the rise in bond yields as being the markets re-evaluating r* but there was lively debate on this topic. France was seen as the major sovereign risk, though the degree of concern varied, while it was agreed that interventions were unlikely.

Real GDP growth picks up moderately in Q3, in line with our forecast. September data confirm pick-up of growth momentum during summer. Supply-demand imbalances do not show signs of easing.

Europe’s energy transition has entered a grid-delivery phase, with networks now a key constraint on renewable growth and electrification. Utility pressures vary: DSOs face load-driven connection backlogs, TSOs need to reinforce networks for offshore wind, and solar-heavy systems require more storage and flexibility. A grid-stress index is constructed to compare transmission, distribution, market and adequacy pressures across a sample of nine European countries. Germany records the highest grid-stress score, driven by congestion costs, reliability pressures, negative-price hours and substation overload. Faster permitting, anticipatory investment, early equipment procurement and grid-specific skills are essential to turn spending plans into operational capacity. Europe’s competitiveness depends on timely commissioning and lower total system costs - not simply on the amount of grid investment announced.