The French central bank, which until now expected an increase of 0.9% in gross domestic product (GDP) this year, revised it on Tuesday “very slightly downward”, to 0.8%. This comes from “less growth gains at the end of the fourth quarter of 2023”, she explained.
“It is now confirmed: France will escape recession,” declared the governor of the Bank of France, François Villeroy de Galhau, in an interview Tuesday evening with Le Figaro.
This forecast, which constitutes a very slight slowdown compared to 0.9% for 2023, is especially less optimistic than that of the government, at 1%, on which its annual budget is based. “Our forecasts now differ by only 0.2 points. Frankly, it is within the margin of uncertainty”, estimates Mr. Villeroy de Galhau
The fair assessment of French growth in 2024 is a major issue for the government, which was already forced in mid-February to announce 10 billion euros in budget cuts when it revised this indicator downward compared to its forecast. initial of 1.4%.
A further downward revision would mean further cuts, or that France would not respect its public deficit objective for 2024 (4.4% of GDP), due to lack of sufficient revenue.
A “worrying” and “very serious” situation, the Court of Auditors judged Tuesday morning in its annual report. The court also considers that the government’s growth projections are “optimistic”, perhaps to the point of compromising the “fragile” trajectory of returning the public deficit to below 3% of GDP in 2027.
“More pronounced rebound”
Cautious for 2024, with a forecast of +0.2% in the first quarter, the Banque de France is however confident for the following years. It thus forecasts for 2025 and 2026 “a more pronounced rebound” than before, “under the effect of more favorable hypotheses on energy prices and financial conditions”.
The French central bank now forecasts growth of 1.5% in 2025 (compared to 1.3% initially forecast) and 1.7% in 2026 (compared to 1.6%). These forecasts are therefore closer to those of the government, which is counting on 1.7% in 2025 and 2026.
This rebound in growth, coupled with the Bank of France’s forecasts on the decline in inflation, confirms the scenario of disinflation without recession, simply passing through a stage of slowed activity in 2024.
The institution predicts, in fact, that inflation will fall below 2% at the start of 2025, which is the target set by the European Central Bank. In 2025 and 2026, it should reach 1.7%, according to the harmonized consumer price index (HICP) allowing comparison between European countries.
Inflation is already falling “significantly” this year: it should stand at 2.5% on average annually, estimates the Banque de France, compared to 5.7% in 2023.
“Measured increases”
In general, “food and industrial consumer goods” should only experience “measured price increases in 2025-2026”, she predicts, “while final energy prices would fall over these two years” .
Outside of energy and food, however, prices will decline more slowly, as evidenced by underlying inflation, which excludes volatile prices from these two categories:. Estimated at 2.4% this year, it should decrease to 2.2% in 2025, only to return below 2% in 2026 (to 1.9%).
“The price of services would slow down later, returning to inflation by 2026 close to its 2002-2009 average (at 2.6%),” notes the Banque de France.
For manufactured products, the institution estimates that “the impact of geopolitical tensions in the Red Sea on transport costs” might “affect retail prices during the second part of 2024, without however calling into question their slowdown.
The progression of wages, slower than in 2023 but still higher than that of prices in 2024, will give some breathing room to households, who will see their purchasing power increase.
