2023-12-19 10:51:54
By Le Figaro with AFP
Published 2 hours ago, Updated 28 minutes ago
“Growth should then gradually accelerate to 0.9% in 2024, then 1.3% in 2025 and 1.6% in 2026.” John Schults / REUTERS
The Banque de France now expects gross domestic product (GDP) growth of 0.8% in 2023.
An exit from inflation “without recession»: the Banque de France said on Tuesday to expect an economy slightly less dynamic than expected in 2023, before a gradual acceleration until 2026 as prices continue to stabilize. The Banque de France now expects growth in gross domestic product (GDP) of 0.8% in 2023, compared to 0.9% so far, in line with the forecast from the National Institute of Statistics (Insee). This revision takes into account a third quarter in the red (-0.1%), penalized by sluggish investments and household consumption. Growth should then gradually accelerate to 0.9% in 2024, then 1.3% in 2025 and 1.6% in 2026.We have confirmation of our disinflation scenario with gradual recovery in growth», commented Olivier Garnier, general director of statistics, studies and international affairs at the Banque de France, presenting these new projections to the press. Inflation would reach 5.7% on annual average in 2023 and fall to 2.5% in 2024, measured according to the harmonized consumer price index (HICP) allowing comparison between European countries.
Consumption is restarting. In addition to the high rates decided by the European Central Bank (ECB) to cool prices, this decline is explained by a decline in food and energy prices, while those of services would be driven by wage increases. Inflation would then continue to decline, falling below 2% at the start of 2025, the inflation target of the European Central Bank (ECB), “in the absence of a new shock on important raw materials»: 1.8% that year and 1.7% in 2026, detailed the Banque de France. This disinflation will occur “without recession», underlined Olivier Garnier, specifying however that these projections were part of a geopolitical context “highly uncertain“. Thus, after the negative third quarter, GDP should increase by 0.1% between October and December, according to the Banque de France, while recession is defined as two consecutive quarters of decline. INSEE expects zero growth at the end of the year.
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A little fresh air for households
From 2024, the easing of prices combined with the increase in real wages will give some breathing room to households, who will see their purchasing power increase and should consume more (+1.5% in 2024 after +0, 7% in 2023), enough to further support activity. The main pillar of French growth, household consumption would also benefit from a drop in the savings rate, which nevertheless remains at high levels since the coronavirus pandemic, at an anticipated rate of 16% in 2026. Support from the activity in 2023, foreign trade should contribute negatively to the evolution of GDP next year.
From 2025, the negative effect of high rates should begin to fade, according to the Banque de France, which would make it possible to revive investments after a trough (-0.4%) expected in 2024. Before restarting, household investments are expected to fall by 4.1% next year, particularly in the construction of new housing. They would be more affected by the tightening of credit conditions than those of companies which would slow down sharply to +0.5%. In 2026, the recovery in household consumption and investments would strengthen “to generate a dynamic recovery», Estimated the central bank. The unemployment rate, which would increase from 7.3% in 2023 to 7.8% in 2025, would start to fall again in 2026 (7.6%). This level remains quite far from full employment (i.e. 5% unemployment) promised by the executive. More optimistic than the Banque de France, the latter also expects 1% growth in 2023 and 1.4% in 2024. In 2022, GDP grew by 2.5%.
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