France's economic growth forecast for 2024 has been lowered to 0.5% from 0.9% by the Bank of France, citing a sluggish start to the year and the impact of Middle East conflict on energy prices.
The downgrade signals a weaker economic outlook for France, impacting consumer spending, business investment, and potentially influencing European Central Bank policy decisions regarding interest rates.
The Bank of France has significantly lowered its economic growth forecast for the euro zone's second-largest economy, projecting a 0.5% expansion for 2024, down from a previous estimate of 0.9%. This downward revision reflects a sluggish start to the year, including an unexpected 0.1% contraction in the first quarter, and the impact of elevated global energy prices stemming from the Middle East conflict.
While economic activity is expected to stall in the current quarter, the central bank noted that business sentiment surveys indicate signs of a pickup in June compared to May. Looking further ahead, growth is anticipated to accelerate, reaching 0.9% in 2027 and 1.2% in 2028, driven by a recovery in consumer spending and business investment.
Inflation is now projected to average 2.5% in 2026, before moderating to 1.7% in both 2027 and 2028, assuming a normalization of energy prices. Currently, high inflation is eroding household purchasing power and dampening consumption, which is expected to rebound next year as price pressures ease. The central bank also presented less favorable alternative scenarios, highlighting the risks of weaker growth and higher inflation due to ongoing geopolitical uncertainties.