have grown by 0.9 % in 2023 ( driven by strong growth in the second quarter ). This is marginally below the Autumn 2023 forecast .
“ High inflation and tighter financial conditions weighed on growth throughout the year despite government support measures and a very favourable labour market , accompanied by dynamic wages that preserved households ’ purchasing power . While net exports contributed positively to growth , these were fuelled mostly by a decrease in imports of goods , as the growth of domestic demand was limited ,” said the report .
In 2024 , it expects it to grow moderately , by 0.9 % annually ( a downward revision of 0.3 percentage points compared to the Autumn Forecast ). The revision can be mainly attributed to a lower carry-over from a weaker than expected second half of 2023 . Economic activity is expected to gather momentum in the second half of 2024 . Private consumption is set to drive GDP growth on the back of rapidly declining inflation .
“ Investment is expected to remain subdued until the second half of the year due to still restrictive financing conditions but is then set to start recovering . Net exports are projected to make no contribution to GDP growth given that imports are set to rise — pushed by strong demand — while exports of goods are only expected to progressively catch up with their pre-crisis level ,” said the forecast .
“ In 2025 , GDP growth is forecast at 1.3 %, marginally below the Autumn Forecast . Economic activity is expected to be further driven by private consumption as inflationary pressures dissipate , and households ’ saving rate declines gradually towards its historical average . Investment from both households and corporations is projected to recover progressively . Net exports are set to [ make ] a limited contribution to growth , with strong export growth offset by rising imports as domestic demand expands ,” it continued .
After peaking at 7 % in the first quarter of 2023 , HICP inflation decreased throughout the year to reach 4.2 % in the fourth quarter , largely thanks to declining energy and commodity prices . The progressive phasing-out of energy-related measures and the increase of the electricity tax in February 2024 , to roughly two-thirds of its pre-crisis level , is expected to lead to an increase in electricity prices of close to 10 %. Meanwhile , wage increases are still set to feed underlying price pressures .
“ However , the downward trend in inflation is set to continue over the forecast horizon . After 5.7 % in 2023 , inflation is expected to reach 2.8 % in 2024 and 2.0 % in 2025 . For 2024 , this is slightly lower than in Autumn , while the forecast for 2025 remained unchanged ,” concluded the European Commission ’ s forecast .
Hall 4 at SIAE 2023 in Paris ( image : Alex Marc , Unsplash .)
Musée d ’ Orsay , Paris ( image : Armand Khoury , Unsplash ).
Banque de France projections
REGIONAL REPORT
According to the Banque de France ’ s macroeconomic projections in December 2023 , the French economy will gradually emerge from inflation without suffering a recession .
“ In the short term , the latest information available suggests a slight downward revision of growth for 2023 to 0.8 %. However , we are maintaining our growth projections for 2024 ( 0.9 %) and 2025 ( 1.3 %) unchanged , and we are expecting growth of 1.6 % in 2026 . 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 ,” said the bank in December 2023 .
“ Economic activity is expected to remain sluggish in 2024 before strengthening subsequently . In 2024 , growth should 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 . In 2025 , growth should also benefit from enhanced private investment as the impact of tighter monetary and financial conditions will be weaker . In 2026 , these trends should strengthen to generate a strong recovery ,” it added .
Headline inflation ( HICP ), which peaked in early 2023 , was expected to continue to subside . After averaging 5.7 % in 2023 , the bank anticipated inflation to fall sharply to 2.5 % in 2024 .
“ Headline inflation should decline substantially over the forecast horizon , helped by falling energy prices ; core inflation ( i . e . HICP excluding energy and food ) should also come down , albeit more slowly . Provided there are no new shocks to commodity import prices , headline inflation should gradually come back towards 2 % by 2025 at the latest , and then remain at a slightly lower level ,” it confirmed .
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 .
“ Consequently , the rate of unemployment should continue to rise , although it should stay under 8 % in 2025 before resuming a downward trajectory as economic activity recovers ,” the bank concluded . n
According to the Banque de France ’ s macroeconomic projections in December 2023 , the French economy will gradually emerge from inflation without suffering a recession
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