Economy: despite Omicron, the optimism of the Banque de France

While the fifth wave of Covid-19 could – once again – hiccup French growth, the Banque de France wants to be reassuring for the year to come. According to the financial institution, the French economy should have erased the scars of the pandemic and regained its pre-crisis cruising speed by 2024.

This Sunday, it unveiled its macroeconomic projections for 2024, in which it lowers very slightly (by 0.1 point) its growth forecast for 2022, anticipating an increase in gross domestic product (GDP) of 3.6%. Growth will remain “very solid”, assured Olivier Garnier, the director general of the institution. And what will not have been gained next year will be made up for the following year, since it raised by 0.3 point, to 2.2%, its growth forecast for 2023.

Thus, with an expected GDP growth of 1.4% in 2024, “we are gradually joining the growth trend which was that before the crisis”, which had not been the case after the financial crisis of 2008, then indicated Olivier Garnier. In other words : “the crisis has left no scar in terms of the level of production and potential production”, thanks in particular to the recovery plan and the France 2030 investment plan, as well as the “dynamism of the labor market”.

The return to pre-crisis growth will also be driven by consumption “more sustained” households that are starting to draw on their savings surplus, or nearly 170 billion euros collected during the pandemic, according to the Banque de France. A fifth is expected to have been spent by 2024.

But also, high investments to come from companies which preserved their margins during the health crisis. These investments could result in particular in an increase in employment (with an unemployment rate of around 7.9% in 2022) as well as an increase in the purchasing power of employees (with wage increases).

To optimize this growth over the long term, it is therefore necessary to increase “the labor supply” and “the skills available to businesses” Who “will have to make a better place for seniors”, specifies François Villeroy de Galhau, who also calls for “go further on learning”.

However, the Banque de France stresses that these forecasts remain uncertain. If additional health restrictions are imposed in the first half of 2022, the context would lead to weaker growth next year in France (around + 2.2%), but which would catch up in 2023 (+ 3.5%) . It should be noted that the supply and recruitment difficulties could also tarnish the French economic trajectory if they last longer than expected.

In addition, neither of the two scenarios envisaged by the Banque de France would make it possible to initiate the country’s deleveraging: in 2024, the public deficit would still remain close to 3.5% of GDP and the debt stable around 115% of GDP in the best of times. The contribution of foreign trade, still lagging behind in certain sectors, “would not recover in 2022”.

As for inflation – whose surge in recent months has become the “first concern” by the Minister of the Economy, Bruno Le Maire, through the multiplication of actions aimed at low-income households (additional energy check, inflation compensation, gas price freeze) – the Banque de France sees two successive phases: after a peak at 3.5% at the end of 2021 of the harmonized rate of inflation, it should remain at a level above 2% for a large part of 2022, before a decline around 1.5% in 2024, i.e. a level higher than that pre-crisis and identical to that observed before the 2008 financial crisis.