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– The forecast for 2025 remains unchanged.
The Bank of France raised the rate on Tuesday to 1.1% its forecast growth for the French economy in 2024, against 0.8% expected so far, while the continued slowdown in inflation is gradually restoring purchasing power to households.
The forecast for 2025 is maintained unchangedwith an expected progression of 1.2% of gross domestic product (GDP)but slightly revised decrease of 0.1 points to 1.5% for 2026the central bank said in presenting its new macroeconomic projections. This year, gross domestic product (GDP) would be driven by foreign trade, while household consumption, the traditional pillar of French growth, would remain sluggish.
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Consumption, the new engine of growth?
It should also benefit, mechanically, from the upward revision of figures for 2023 and early 2024 carried out by the National Institute of Statistics (Insee). While the third quarter should benefit from the positive impact of the Olympic and Paralympic Games, a “backlash” is expected over the last three months of the year, according to the Bank of France. 2025thanks to the decline in inflation which is restoring purchasing power to households and an increase in real wages, the consumption should take over foreign trade as main driver of growth.
After reaching 5.7% in 2023the pace of inflation would slow to +2.5% in 2024 then +1.5% in 2025 thanks to the announced increase in regulated electricity prices. There would be a slight rebound to 1.7% in 2026, but the price increase would remain below the ideal target set at 2% by the European Central Bank (ECB). The Banque de France has however warned that these projections are subject to major hazardsfirst of all political uncertainty in France, which is leading to wait-and-see behavior among households and businesses.
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Fixing degraded finances
As new Prime Minister Michel Barnier continues to work on forming his government, the presentation of the budget to Parliament could be delayed by one week October 9, a date considered by Matignon instead of the 1st, as recommended by the organic law. Significant efforts are expected to redress Public finances seriously deterioratedwithout it being clear at this stage whether the government will make significant spending cuts, increase taxes or a mixture of the two.
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