On Monday, the Bank of France released its quarterly outlook, which revealed a downward revision to the country’s economic growth forecasts for the coming years. The central bank now expects France, the eurozone’s second-largest economy, to grow by 1.1% in 2024 and 0.9% in 2025, down from previously forecast growth of 1.2% for 2025. This adjustment reflects the combined impact of domestic political developments. challenges and global economic volatility.
The central bank stressed that the government’s fiscal consolidation efforts and prevailing political uncertainty are expected to dampen consumer spending and private sector investment. A succession of political crises during the current year has led to increased caution among consumers and businesses, who are wary of the economic future amid the potential for higher U.S. tariffs.
Further political disruptions occurred on Friday when President Emmanuel Macron appointed a new prime minister, the fourth this year, following the ouster of the previous government by opposition lawmakers over disagreements over the 2025 budget law. The bill aimed to reduce the government deficit bringing from 6.1% of production this year to 5% in 2025.
The Bank of France warned that if the new government proposes a budget with reduced fiscal consolidation, any potential growth benefits would be offset by persistent political uncertainty, especially regarding the state of public finances. Governor Francois Villeroy de Galhau, speaking to Le Figaro newspaper, warned that without addressing budget issues, France could fall economically behind its European counterparts.
Despite these challenges, the central bank forecasts a recovery in economic growth to 1.3% for both 2026 and 2027, supported by wage growth faster than inflation. However, it was noted that this growth could be undermined if households chose to increase their savings due to continued uncertainty.
The Bank of France also forecast that inflation would remain below the European Central Bank’s target of 2% over the next three years, with rates expected to decline to 1.6% in 2025 and then gradually rise to 1.7 % in 2026 and 1.9% in 2026. 2027. Without stricter fiscal measures, France’s debt is expected to continue its upward trajectory, reaching 117% of GDP in 2027.
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