Price escalation. Largely contained since France joined the euro, inflation is rising dramatically in France and in Europe since the end of 2021. Under the combined effect of supply difficulties linked to Covid-19 and the Russian invasion of Ukraine, prices have soared in recent months.
The OECD estimates that inflation should reach 8.5% in its member countries in 2022. In France, thanks to the tariff shield put in place by the government, the increase is more contained than in many European neighbors but pressure is mounting on households and businesses. In May, inflation was 5.2% in France, a level which had not been reached for 37 years.
“A lot of uncertainties”
But how far can this price spike go? In an interview given to Figaro on May 31, 2022, the Minister of the Economy Bruno Le Maire estimated that France should get out of « pic d’inflation fin 2023 »
. According to him, inflation should then remain at a high level, around 2%
.
There are a lot of uncertainties
, warns Gilbert This, professor of economics at Neoma Business School. This will depend on the continuation of the war in Ukraine and the restrictions in China linked to Covid, but also on the evolution of wages.
The researcher fears that an increase in wages will mechanically fuel the rise in prices.
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Companies have not yet fully passed on the rise in raw materials and workers will demand wage increases to compensate for inflation
, adds Henri Sterdyniak, economist at Science Po.
Inflation “between 3% and 4%”
A catch-up in energy prices following the price cap in 2022 is also to be feared, despite the reassuring words of Bruno Le Maire.
Co-founder of the Terrified Economists, Henri Sterdyniak also believes that the situation will be very dependent on the international context. When the situation will normalize in China, we can expect a number of tensions to subside. There will also undoubtedly be some economic slowdown in the United States which will bring down the price of raw materials
, he predicted.
In contrast, there will always be tensions over Russian gas and rising prices will continue to hit European countries
, continues Henri Sterdyniak. Consequently, if inflation can start to decline in 2023, it will remain between 3% and 4%. In the medium term, energy prices will continue to rise and we should see inflation trending higher than what we have seen since the beginning of the 2000s
, concludes the economist.
