Posted Jan 11, 2023, 10:53 AMUpdated on Jan 11, 2023 at 6:10 p.m.
After INSEE on Tuesday, it is the turn of the Banque de France to suggest that the French economy is avoiding going off the road. “At the end of 2022, and despite the succession of external shocks, economic activity continues to show resilience”, affirms the issuing institute based on the results of its last economic survey published this Wednesday.
A resilience that allows growth to stay in the green. In the last quarter of 2022, the Banque de France maintains its forecast of a probable increase in GDP “around” 0.1%, more optimistic than INSEE, which anticipates a drop of 0.2%. During the first weeks of 2023, French growth should keep its head above water with, according to the Banque de France, GDP stability during January.
No “hard landing”
“The activity in France is holding up better than expected”, rejoiced on Radio Classique the governor of the Banque de France, François Villeroy de Galhau. Of course, the horizon is far from clear and there are many uncertainties. The dynamic is “slowing down” and is now on “slightly positive growth”. “It holds”, underlined the governor. He believes that “France will avoid the scenario of a hard landing”.
In detail, the survey of 8,500 business leaders between December 20 and January 5 shows that activity continued to grow in December in industry, services and construction, and this, stronger than expected the previous month. This is particularly the case in computer, electronic and optical products, pharmaceuticals, automobiles, and other industrial products. By contrast, it is declining in rubber and plastic products.
Supply difficulties ease
The icing on the cake, tensions in supply chains have eased in recent months. Only 41% of industrial companies believe that they are still a problem. Far from the peak of 64% recorded in April. Same observation in the building industry where only 33% of business leaders point to this problem.
Similarly, the energy crisis seems to have less weight. Slightly less than a quarter of companies indicate that their activity was affected in December by this problem. “A proportion roughly unchanged since October”, underlines the Banque de France, before adding that “for the next three months, almost a third of companies expect an impact (weak or strong) on their activity”.
Ongoing concerns for the future
However, as recalled at the same time during a press briefing Olivier Garnier, the director general of the Banque de France, “there is a level of concern about the future which remains high”. As a result, the scenario of a “limited and temporary” recession still cannot be ruled out.
In January, activity should be stable in the building sector and progress in a disorganized manner according to the expectations of the business leaders questioned. The increase would be limited in services and industry, with strong sectoral disparities: decline in clothing or rubber-plastic in particular, but increase in pharmaceuticals, automobiles or aeronautics.
In industry, “the opinion on order books continues to fall while remaining above its long-term average, while that on inventories continues to rise significantly above its average”, underlines the Bank of France. This situation could weigh on industrial activity.
No alert on EMPs
Hearing by the Senate Finance Committee later in the morning, François Villeroy de Galhau also pointed to the deterioration in the cash position of companies. “The extension of payment terms to SMEs and VSEs from certain larger companies is not acceptable,” he insisted. According to the Banque de France, 16 billion euros of cash would be unduly captured by these large companies.
On the other hand, the resilience of companies can be seen in the absence of an alert on the repayment of loans guaranteed by the State (PGE). “In 2022, we received 598 requests for the restructuring of PGEs, this is less than 0.1% of the total number,” indicated the Governor of the Central Bank, who closed the door to “generalized rescheduling”.