This slowdown will be followed by a rebound in growth to 1.2% in 2024 and 1.8% in 2025.
The growth of the French economy will experience a sharp decline in speed in 2023, still affected by the energy crisis and inflation, before rebounding over the following two years, the Banque de France projected on Saturday. The increase in gross domestic product (GDP) will decelerate sharply, from 2.6% in 2022 to 0.3% in 2023, according to the scenario “most likelyused for the French central bank’s macroeconomic projections for the next three years.
This decline will be followed by a rebound to 1.2% in 2024 – less than the previously anticipated +1.8%, because “winter 2023-24 could still be a bit complicated in the context of the energy crisis“, according to its managing director, Olivier Garnier. The recovery will continue in 2025 with growth expected at 1.8%.
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However, these forecasts remain subject to high uncertainty due to the high volatility of energy prices, geopolitical tensions, especially the war in Ukraine, and the evolution of the health situation in China with Covid-19, said underlined the Bank of France. This is why it publishes for next year a range of the evolution of GDP between -0.3% and +0.8%.
Oil and gas prices will remain high
In any case, the institution is more pessimistic than the government, which forecasts 2.7% growth for this year and 1% in 2023. “We cannot rule out a recession, but if there is a recession, it will be limited and temporary“, estimated Olivier Garnier. If they will calm down somewhat, oil and gas prices will remain high and will continue to fuel inflation, as will food prices, which have also soared.
The rise in prices should amount to 7.3% at the end of 2022 and should reach a peak in the first half of 2023 (6% over the year as in 2022 on an annual average) before falling back to 4% at the end of next year and return to around 2% towards the end of 2024-25. To measure inflation, the Banque de France uses the harmonized consumer price index (HICP), which allows comparison between European countries and gives more importance to energy prices than the consumer price index. consumption used by INSEE and the French government.
Faced with inflation, after having already raised its key interest rates four times since the summer, the European Central Bank (ECB) is readyto go beyond to overcome inflation“, even if the objective “is obviously not to cause a recession“, warned Saturday in an interview with the Sunday newspaper the governor of the Banque de France, François Villeroy de Galhau.
«We have acted fast and strong since the spring, when we saw imported energy inflation spreading to the rest of the economy“, he defended, while the rise in prices in the euro zone reached 10.1% in November over one year.
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«Our interest rates have therefore already been raised on four successive occasions, from -0.5% to 2%. And we’re ready to go beyond that to beat inflation, although obviously our goal isn’t to cause a recession.“, he explained, noting that “for an anti-inflationary monetary policy to produce its effects», it takes between 18 months and two years. According to François Villeroy de Galhau, “inflation under control will help restore confidence. It will also make it possible to resume growth in household purchasing power, which between 2015 and 2021 had grown by an average of 8%».