Uncertainties, nationally and internationally, led the Banque de France on Monday to lower its French growth forecast for 2025, while its governor warned against “political discord” in the country.
The central bank now forecasts GDP growth of 0.9% in 2025, compared to 1.2% previously.
The 2026 forecast is also revised down by 0.2 points compared to the September projections, to 1.3%, which is also its forecast for 2027. It still expects growth of 1.1% this year.
In an interview with Le Figaro, Governor François Villeroy de Galhau puts the lowering of forecasts for next year into perspective, observing that the bank has also revised downwards its forecast for the euro zone as a whole.
But he remains very concerned about the question of public finances, “which must transcend various partisan or personal interests.”
“If our country remained in budgetary denial due to political discord, it would risk progressive economic and European collapse,” he warns.
The Banque de France forecasts a public deficit of between 5 and 5.5% of GDP next year, while the budget that the Barnier government was unable to pass due to censorship estimated it at 5% of GDP. , after 6.1% this year.
At 5% or a little more in 2025, “France would still be in the credibility zone”, according to the governor. But “around 6% (it) would be in the fragile zone, with European sanction and risk of loss of investor confidence”, he warns.
Budgetary restrictions often mean less growth. But in the present case, a public deficit which would remain very high “would not improve the growth forecast, because less budgetary consolidation would generate more uncertainty”, affirms the governor.
– “Moderate” rise in unemployment –
It would in fact be less confidence, therefore less business investment or household consumption. The governor recalls that 86% of them are worried about the level of public debt.
For the 2025 budget that the Bayrou government will present, Mr. Villeroy de Galhau continues to advocate spending savings, but judges that “targeted” tax increases, affecting “neither SMEs nor the entire middle class” , may also be necessary to “start recovery”.
The Bank of France's reference scenario for the years to come is that of “an end to inflation without recession”, even if the recovery is postponed to 2026 and 2027.
It is counting on inflation (expressed in a harmonized index allowing European comparisons) of 2.4% on annual average this year, then 1.6% in 2025, 1.7% in 2026 and 1.9% in 2027.
For Mr. Villeroy de Galhau, victory against inflation “is close and almost assured”.
He believes that with wages which, moreover, are growing on average faster than prices, “consumption should pick up”, provided, again, “that the savings rate does not rise due to lack of confidence”. He recalls that disinflation allows the European Central Bank to lower its interest rates. This allows everyone, especially individuals, to borrow cheaper.
The Banque de France nevertheless foresees “a transitional phase of slowdown” in the job market.
The unemployment rate, down to 7.4% this year, could be “between 7.5% and 8% in 2025-2026”, explains the governor, nevertheless describing this rise as “moderate”.
But the Banque de France notes that its December projections are subject to uncertainties, rather downwards. They were in fact arrested on November 27, before the censorship of the Barnier government which occurred a week later.
Finally, the Bank wonders about the effect, undoubtedly bearish but of a magnitude “difficult” to quantify, that increased trade tensions would have with the return of Donald Trump to power in January.
