2023-09-12 20:00:14
Published on September 12, 2023 at 8:00 p.m.
Against the backdrop of still robust inflation, high interest rates and the slowdown in activity in the euro zone, the economic outlook is darkening in France. The economic indicators are also on a downward trend everywhere. But the Bank of France does not see the future bleak. “Contrary to other indicators, our surveys suggest that there will be no marked turnaround in the economy and even less of a recession,” assures Olivier Garnier, the institution’s chief economist.
In its latest note published this Tuesday, it expects an increase in gross domestic product (GDP) of between 0.1% and 0.2% in the third quarter – an estimate close to that delivered last week by INSEE (0 .1%) -, after a surprise rebound of 0.5% during the previous three months.
Slowdown in services
According to its survey carried out between August 29 and September 5, 2023, in August, activity increased in services as well as in construction but fell slightly in industry. Business leaders anticipate progress in all sectors in September, although with a slowdown in services. Leisure and personal service activities are even in sharp decline. In industry, however, stocks are considered high and order books below average. The next few months also promise to be more difficult in terms of structural work.
The survey, however, confirms a return to normal on production lines after the high tensions caused by the Covid-19 pandemic and the war in Ukraine. This should contribute to the deceleration of price increases. The Banque de France notes that in August, more manufacturers have already lowered their prices than raised them. If the increases prevail in clothing-textiles or aeronautics, this is not the case in the chemical or wood-paper industry.
In the agri-food sector under the spotlight, companies have also been more inclined to reduce their prices than to raise them. Which is “relatively new”, she emphasizes.
New forecasts
However, the situation remains fragile. Geopolitical risks remain high, uncertainties over the evolution of the energy market and the impact of monetary tightening are high. The unexpected jump in GDP in the second quarter should nevertheless lead the Banque de France to revise “slightly upwards” its growth forecast for the whole of 2023, so far set at 0.7%.
According to the European Commission, France should do better than the euro zone average this year with a GDP increase of 1% (compared to 0.8%) – which is what Bercy forecasts at this stage. The French economy, on the other hand, would grow at a rate below average in 2024, at 1.2% compared to 1.4%.
This Thursday Bercy will unveil the new projections which will be included in the finance bill for 2024. Some private institutes or bank forecasters are already displaying a significantly less optimistic vision of the future. BNP-Paribas, for example, expects GDP to decline in the third quarter and stagnate in the fourth. Growth would thus be limited to 0.7% in 2023. It would only pick up gradually in 2024 to reach 0.5% over the whole year.
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