2023-12-19 14:37:21
The Bank of France evokes a “disinflation scenario”. Its governor 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. “It is a limited revision for the year 2023. It is an undeniable slowdown, but it is not a recession as we feared a year ago,” assured with France Inter François Villeroy de Galhau, the governor of the Bank of France.
The latter 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.
“The fog is starting to clear a little”
“Our economy is obviously going through difficult navigation, in France as in Europe, since Covid and the Russian invasion of Ukraine. We remain vigilant, but we are a little more confident because the fog is starting to dissipate a little,” commented François Villeroy de Galhau.
He projects: “We will bring inflation back to around 2% by 2025 at the latest. And that’s good news on purchasing power, because prices will increase less quickly than wages (…) and also for interest rates, which we will probably be able to lower over the period.
Growth should in fact gradually accelerate to 0.9% in 2024, then 1.3% in 2025 and 1.6% in 2026. “We have confirmation of our scenario of disinflation with gradual resumption of growth,” said commented Olivier Garnier, general director of statistics, studies and international affairs at the Banque de France, presenting these new projections to the press. “It’s not a crystal ball: the Bank of France makes its forecasts independently, we question 8,500 companies every month in the field,” argued François Villeroy de Galhau.
Disinflation “without recession”
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.
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 the 2% mark at the beginning of 2025, the inflation target of the European Central Bank (ECB), “in the absence of a new shock on major 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 “highly uncertain” geopolitical context.
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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