France – 2024-2025 Scenario: keeping a cool head amid the excitement of the Olympics and persistent political uncertainties

Economic activity continued to grow in France in Q1 2024, up 0.2% after 0.3% in Q4 2023. The growth overhang at the end of the first quarter thus stands at 0.6% for 2024. 
As we finalised our scenario before the dissolution of the National Assembly, it can be described as “politically neutral” or “with policy unchanged”. But the political picture that appears to be emerging, with none of the coalitions achieving a majority, could have little impact on the growth scenario through end-2025 and instead could have an impact above all on public finances and sovereign spreads.
We expect growth to be stable in 2024 relative to 2023, at 1.1%. The main growth driver will be household consumption, as disinflation continues. But growth will also be fuelled by foreign trade, owing to the points already observed. However, investment will in all likelihood continue to be negatively impacted by the past tightening of financial conditions, while the destocking trend of late 2023 and early 2024 is likely to detract from annual growth. Growth is expected to increase to 1.3% in 2025, bolstered by persistent strong consumption momentum and the rebound in investment as monetary policy returns to normal. Annual average inflation is expected to fall sharply, to 2.3% in 2024 (in CPI terms) and 1.5% in 2025.