Bank of France hikes 2023 growth outlook

19 Sep 2023

French economic growth will be slightly less than forecast over the next two years due to weakness in its principal trade partners, according to the central bank on Monday.

However, the Bank of France increased its forecast for this year following a robust second quarter.

France’s economy, the second largest in the eurozone, is forecast to grow 0.9% in 2023, according to the central bank’s quarterly economic outlook, an upward revision from June’s figure of 0.7%.

The improvement to the outlook was predominantly a result of better-than-forecast Q2 growth of 0.5%, following a boost by refineries restarting following strike action, nuclear power output returning after maintenance and the delivery of an ocean liner, Reuters reports.

Growth is again forecast at 0.9% in 2024, down from 1.0% in June, before rallying to 1.3% in 2025, albeit weaker than the 1.5% forecast by the Bank of France in June.

Even though there is expected to be an improvement in consumer spending over the next two years, a weak outlook for Germany’s economy, as well as a growth slowdown in China, are forecast to curb gains, the Bank of France stated.

After reaching a peak of 7.3% in February, the country’s central bank has predicted inflation will fall to an average of 5.8% in 2023, 2.6% in 2024 and 1.8% in 2025, just under the 2% target set by the European Central Bank.

Furthermore, the Bank of France said employment would stay strong in 2023. However, a lag between the wider economy and the labour market signalled more jobs would be lost than created as of 2024.

The central bank forecasts the unemployment rate will increase from 7.2% this year to 7.5% in 2024 and 7.8% in 2025.