France – 2023-2024 Scenario: the economy and the challenges of inflation
- 2023.12.01
- 0
- Download the publication (PDF - 1,24 MB)
- Summary
- Recent trends in activity
- Our scenario for 2022-2023
- Focus - The financial health of NFCs and default risks
In resume
Although the rise in energy prices – exacerbated by the war in Ukraine – is partly cushioned by public support measures and the "tariff shield", it is negatively impacting the French economy, household's purcha-sing power and business income and its total cost in 2022 is expected to reach 1.5 points of GDP. These effects on income will lead to a slowdown in demand at the end of 2022 and early 2023, at which point a contraction in GDP is not ruled out. In total, GDP growth is expected to reach 0.3% in 2023 after 2.6% in 2022.
After a peak in inflation in early 2023 and a likely contraction in activity in Q4 2022/Q1 2023, growth is expected to pick up slightly starting in Q2. But it will remain below its potential rate. Inflation will decline throughout the year but remain high and above wage growth, which will undermine household purchasing power and consumption. In addition, the European Central Bank will continue its monetary tightening. Four more rate hikes are expected in 2023 and the start of quantitative tightening will reduce liquidity inflows on the bond markets. This will lead to increasing financing costs, while investment is also expected to slow significantly, despite a fiscal policy that continues to support the economy.
Pierre BENADJAOUD, Economiste