If the French economy were to contract in 2023, a possible recession would not have ” nothing to see ” with the historic decline in French GDP in 2020 due to the Covid-19 pandemic (-8%), said the Banque de France. The recession would also be “limited in time”, says the same source.
The governor’s remarks are nevertheless a warning, less than 24 hours following a historic rate hike by the European Central Bank intended to curb inflation – and likely to slow down growth at the same time.
The French government’s latest growth forecast is 1.4% for 2023, but it might be revised downwards in the coming days, on the occasion of the presentation of the finance bill for 2023 and the budgetary trajectory of the government until the end of Emmanuel Macron’s five-year term.
“We no longer have a motor for the French economy, we are at the end of the race”.
The words of the Governor of the Banque de France contrast with the « résistance » of the French economy touted by the government in recent weeks, especially since the unexpected half-point increase in GDP in the second quarter. In recent days, several forecasters had also recognized that despite their initially more pessimistic expectations than those of the executive, growth should ultimately indeed reach the government target of 2.5% in 2022, or even exceed it slightly.
“Spring and summer allowed travel, the return of tourists “, which supported the activity, underlined at the end of August Charlotte de Montpellier, economist at ING. “But we no longer have an engine for the French economy, we are at the end of the race”, she was already anticipating. In a note published on Friday, the economist also expects growth of only 2.2% in 2022 and a contraction of the economy of 0.2% of GDP in 2023. The International Monetary Fund, for its part, forecasts a growth of 1% next year.
French economic engine, “consumption should continue to increase in the 3rde quarter at the same pace as in the previous quarter and then slow down at the end of the year with the attenuation of the catch-up effects” post-Covid-19, details the National Institute of Statistics in its economic update published on Wednesday. Earlier this week, S & P Global had already noted for the month of August the weakest growth in private sector activity for 17 months in France.
A “3R” economic cycle
A few days before the publication of the Banque de France’s macroeconomic projections for the period 2022-2024, the Governor of the Banque de France summarizes the economic cycle to come by “3R”: “resistance in 2022, slowdown in 2023 and rebound in 2024”. Not without recalling, while the war in Ukraine caused inflation to jump, that times “are extraordinarily uncertain”.
The reasons for shortness of breath
On BFM Business, the Governor of the Banque de France detailed the reasons for the slowdown in French growth. “Companies say that orders are holding up, that the French still want to consume, that companies still want to invest”, initially welcomed François Villeroy de Galhau. But companies also admit to having “great difficulties to follow, what economists call supply problems: supply difficulties, even if they diminish; inflation, in particular on energy, and then the recruitment difficulties, which have been going on for years”.
