2023.12.1909:40:00UTC+00Bank Of France Says French Economy To Avoid Recession

The Bank of France trimmed the French economic growth estimate for this year to 0.8 percent from 0.9 percent on Tuesday, but retained the projections for next two years.

Gross domestic product is forecast to grow 0.9 percent next year and 1.3 percent in 2025.

Growth is seen improving to 1.6 percent in 2026.

"These projections generally confirm our assessment that the French economy will gradually emerge from inflation without suffering a recession," the Bank of France said.

"This acceleration in 2026 assumes that the effects of recent shocks to the French economy - external tax shock, tightening of monetary and financial conditions - will have abated by that time," the bank said.

Headline inflation is forecast to average 5.7 percent this year and then fall sharply to 2.5 percent next year, thanks for easing energy prices. Both figures were lowered by 0.1 percentage points from September.

Inflation is projected at 1.8 percent in 2025 and 1.7 percent in 2026, below to the European Central Bank's 2 percent target.

Core inflation, which excludes prices of food and energy, is expected to average 4.0 percent this year before falling back sharply to 2.8 percent next year and 2.2 percent in 2025. The rate is seen at 1.9 percent in 2026.

Next year, growth is expected to be driven to a greater extent by household consumption, due to the fall in inflation, which will benefit the purchasing power of wages, and to the lower saving ratio, the bank said.

Enhanced private investment should also boost growth in 2025 as the impact of tighter monetary and financial conditions will be weaker. In 2026, these trends should strengthen to generate a strong recovery, the bank added.

The unemployment rate is forecast rise to 7.6 percent next year from 7.3 percent this year. Both rates were lifted by 0.1 percentage points. The jobless rate is seen climbing further to 7.8 percent in 2025 and retreat to 7.6 percent in the year thereafter.

"Over the next few quarters, following a time lag, employment is expected to adjust to the economic slowdown observed since late 2022, with only a partial recovery of past productivity losses," the Bank of France said.

"On the whole, in an uncertain environment, the risks to our projections appear to be slightly negative for economic activity and balanced for inflation," the central bank added.