France: Villeroy sees inflation at peak and limited impact of Omicron


PARIS, Jan.4 (Reuters) – Inflation in France and the euro area is nearing a peak and the recent surge in contaminations with the coronavirus responsible for COVID-19 will have a limited impact on the French economy, said Tuesday the governor of the Bank of France, François Villeroy de Galhau.

Like much of the world, France has experienced a marked acceleration in price increases for about a year with the strong global economic recovery following the crisis caused by the COVID-19 pandemic.

However, INSEE reported on Tuesday a stabilization of inflation in December compared to the previous month, at a peak of 3.4% over one year according to preliminary data harmonized with European standards.

Inflation is “today close to its peak in our country (December showing the start of stabilization) and in the euro zone”, declared François Villeroy de Galhau in his wishes published on the Banque de France website.

“While being very attentive to it, we believe that the difficulties of supply and the tensions on energy should gradually decrease throughout the year”, he added.

In its latest quarterly forecast released last month, the Banque de France said it expected inflation to peak at around 3.5% at the end of 2021 before gradually falling below 2% at the end of this year.

It also predicted a slowdown in the growth of the gross domestic product of France to 3.6% in 2022 after a strong rebound of 6.7% last year.

Since the publication of these forecasts, however, France has experienced a powerful new wave of the COVID-19 epidemic with the arrival of the highly contagious Omicron variant of the coronavirus, which has led the government to decide on new health restrictions likely to disrupt the activity of certain sectors, in particular leisure and tourism.

François Villeroy de Galhau, however, thinks that the economic impact of this new outbreak of contamination will be limited.

“We have learned for two years that each health wave, as serious as it is, had decreasing economic effects”, declares the governor of the Bank of France. “In our December forecast, we showed that even an unfavorable scenario of new severe health restrictions – which we do not have today – would not prevent the French economy from returning to the trajectory by next year. of GDP it would have had in the absence of the COVID crisis. ” (Leigh Thomas report, written by Bertrand Boucey, edited by Nicolas Delame)




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