Key facts
- French economy forecast to grow 0.4% in 2024, down from 0.7% in June.
- Government to revise its 0.7% growth forecast and deficit target on Friday.
- Inflation forecast to reach 3.1% by year-end, averaging 2.3% for the year.
- Household purchasing power expected to decline by 0.4%.
- Business investment forecast to fall 0.3%.
- Unemployment rate projected to rise to 8.6% by year-end.
The French economy is expected to grow by only 0.4% this year, a significant downgrade from INSEE's previous forecast of 0.7% and less than half the 0.9% expansion recorded last year. This revised outlook, released on Thursday, falls short of the government's current 0.7% forecast, which is set to be revised on Friday.
The national statistics office attributed the weaker outlook to declining purchasing power weighing on consumer spending and firms reining in investment. Inflation, measured by EU-harmonised data, is forecast to tick up from 2.7% in August to 3.1% by the end of the year, with an average rate of 2.3% for the year.
Household purchasing power is expected to decrease by 0.4% due to higher prices and stagnant wage growth, although consumer spending is still forecast to increase by 0.3% as households dip into savings. Business investment is predicted to fall 0.3% amid weak consumer demand, higher interest rates, and a difficult international context.
Consequently, the French economy is expected to lose 52,000 private sector jobs this year, pushing the unemployment rate to 8.6% by year-end, up from 8.0% a year earlier. The weaker economic outlook also makes France's current deficit-reduction target of 4.9% of economic output for this year difficult to reach.