As food inflation takes precedence over rising energy prices, the peak should be reached in June.
Renewed optimism at the Banque de France. In its latest forecasts published on Monday, the institution doubled its growth forecast in France for 2023 and now expects a 0.6% increase in gross domestic product (GDP), against 0.3% envisaged until then. On the inflation front, the central bank is lowering its forecast for 2023.”There is a little more growth and a little less inflationsummed up the chief economist of the central bank, Olivier Garnier.
For 2023, the institution justifies the doubling of its growth forecast by inflation (in particular energy) lower than expected, and “higher growth in global demand“. These pleasant surprises are, however, offset by “the financial environmentin the country, with exchange rates and borrowing rates less positive than in December. Even increased, the growth forecast for 2023 remains lower than those of the OECD (0.7%, raised by 0.1 point on Friday) and the government (1%).
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An inflationary peak expected at the end of the first quarter
Another lesson: while food inflation has taken over from energy inflation as the main driver of price increases, it should peak.towards the end of the first semester», According to Matthieu Lemoine, one of the authors of the 2023-2025 macroeconomic projections published on Monday. Prices would then rise more slowly, thanks to “the planned easing of the price of agricultural inputs (…) and the international prices of agricultural raw materials“, explains the institution. But “we do not expect a fall in food prices over the horizon of our projection», That is to say 2025, warns Matthieu Lemoine.
All goods and services included, the harmonized consumer price index (HICP) – the inflation barometer which refers to the European level and which the Banque de France uses in its projections – would stand at 5.4% on an annual average in 2023, against 6% expected so far. The HICP would then fall to 2.4% in 2024 then 1.9% in 2025, below the 2% mark targeted by the European Central Bank (ECB).
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No inflationary spiral
These forecasts of activity and inflation are nevertheless dependent on “many hazards“. “The indirect effects of the recent banking and financial volatility should be closely monitored, as recent events caused by the closure of the Silicon Valley Bank in the United States or the uncertainty surrounding Credit Suisse have reminded us.“, Details the Bank of France. The difficulties of American and Swiss banks have indeed caused chaotic sessions on European financial markets including the Paris Stock Exchange, investors fearing a major financial crisis.
But the governor of the Banque de France François Villeroy de Galhau repeated Monday morning on France Inter that French and European banks were not affected by this banking crisis. “French banks are very solid” And “no problem concerns French banks“, did he declare. And the institution does not believe either in a lasting effect on the economy of the tensions concerning the pension reform. “There may be temporary effects from one quarter to the next“, admitted Olivier Garnier, but”when we reason on the multi-year horizon (…) it is not likely to significantly affect the projection“.
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Increase in the average salary per head estimated at 6%
These uncertainties put aside, the Banque de France is therefore counting on a clear upturn in growth in 2024 (1.2% as anticipated in previous forecasts) and in 2025 (1.7% against 1.8%). This relaunch should be supported in particular by an upturn in household consumption (+1.5% in 2024 and +1.6% in 2025), whose remuneration should experience more dynamic growth than in recent years.
The average salary per head, which includes overtime and bonuses, should grow by 6% in 2023, 4.6% in 2024 and 3.7% in 2025, without purchasing power jumping in the same proportions. “This wage increase should not lead to an inflationary spiral“, specifies the Bank of France. In terms of employment, the unemployment rate would increasetransient” in 2023 and 2024 before restarting a “declinefrom 2025.