PARIS (Reuters) – Growth in the French economy should reach 0.8% in 2024 after 0.9% in 2023, but will rebound more than expected next year, according to the Banque de France (BdF) which also forecasts a sharp decline in inflation this year.
In its latest macroeconomic projections published on Tuesday, the central bank lowered its forecast for French gross domestic product (GDP) growth by 0.1 points this year compared to its previous forecast.
This slight decline is due to weaker growth gains than expected in the fourth quarter of 2023, explains the BdF, which nevertheless emphasizes that more favorable assumptions on energy prices and financial conditions will contribute to a more marked rebound than previously expected. expected in 2025 and 2026.
The BdF expects growth of 1.5% in 2025 and 1.7% in 2026, up respectively 0.2 points and 0.1 points compared to December forecasts.
“In 2024, growth would be driven more by household consumption than in 2023, due to the decline in inflation. In 2025, growth would also benefit from a recovery in private investment, as that monetary and financial conditions would improve,” explains the institution.
“In 2026, these trends would strengthen to generate dynamic activity.”
Inflation harmonized with European standards (HICP) will continue to decline and will reach 2.5% in 2024, an unchanged forecast compared to that of December, and after 5.7% in 2023. The normalization of prices of food raw materials and to enerir must in fact continue this year, according to the BdF.
If the tensions in the Red Sea can affect the price of manufactured goods in the second half of the year, without calling into question the trend towards decreasing prices, the BdF underlines that “the price of services would slow down later, to return to a level by 2026. inflation close to its 2002-2009 average.
Inflation is expected to reach 1.7% in 2025 and 2026, below the 2% target set by the European Central Bank (ECB).
Another reason for relief for the ECB, the BdF notes that the average salary per capita slowed more than expected in the fourth quarter of 2023, while the obligatory annual negotiations for 2024 suggest a weaker salary dynamic than expected.
The increase in average salary is revised to 3.2% in 2024, compared to 4.1% expected in December.
The real wage would nevertheless be positive, which will support consumption.
The unemployment rate is expected at 7.7% in 2024, up 0.1 points from the December forecast.
(Written by Corentin Chappron, edited by Kate Entringer)
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