Economists expect zero growth in France in 2023

Posted September 14, 2022, 6:45 AMUpdated September 14, 2022 at 11:22 am

Recession? stagnant? Anemic growth? In latest days, economists have additionally been operating their fashions to replace their forecasts for the French economic system in 2023. And they’re extra pessimistic than the manager, which is now relying on 1% growth subsequent 12 months and has acknowledged its goal for that. 2.7% each year. According to them, financial exercise ought to decelerate in the approaching months.

“The European and French economies will face a big slowdown subsequent 12 months and we can not rule out a restricted recession,” Bank de France Governor Francois Villeroy de Galhau stated late final week. The agency will unveil its new estimates this Thursday.

So far, enterprise exercise has definitely held up effectively, pushed by order books which are nonetheless effectively stuffed, and consumption supported by the superb season achieved by eating places and accommodations.

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But the playing cards have been reshuffled over the summer season. A brand new outbreak of fuel and electrical energy worth fever linked to the warfare in Ukraine now raises fears of a slowdown in industrial manufacturing. Some firms have already in the reduction of. Power rations are actually on the desk as soon as Russian deliveries are minimize off. Faced with ongoing inflation in the euro zone, the European Central Bank (ECB) has for its half taken steps to increase its key fee hikes, suggesting a sequence of recent hikes in the approaching months.

“All financial indicators are pointing to a weakening of exercise”, observes Bruno Cavaliere, chief economist at Bank Odo BHF who expects “a stagnation” of exercise in 2023. “Growth can be virtually zero subsequent 12 months,” stated Charles-Henri Colombier, director of financial situations on the Rexcode Institute. By then, the French economic system will undergo a technical recession in the final quarter of 2022 and the primary quarter of subsequent 12 months, in response to two consultants.

“The danger is highest this winter.”

“Winter guarantees to be the time when dangers are at their highest,” explains Bruno Cavaliere. Between rising power payments, provide threats and rising rates of interest, “firms are going to be very reluctant to spend in the following few quarters,” he says. Investments can be closely affected.

In phrases of family consumption, the principle driver of the French economic system, already at half-mast because the begin of the 12 months, it dangers being additional weakened by the introduction of tariff shields on fuel and electrical energy. 1 is much less beneficianter January 2023. Faced with rising power payments, the French could have much less cash to spend on different objects. Rising rates of interest are additionally prone to decelerate their actual property investments.

“At the identical time, world demand can be much less favorable,” emphasised Charles-Henri of Colombia. Among different issues, the doable entry into recession of Germany, France’s largest buying and selling associate, could have a detrimental influence on French exports.

According to Barclays, recession is in sight

More pessimistic than his colleagues, Natixis financial adviser Patrick Artas believes a recession is feasible in France subsequent 12 months. “The state of affairs for the French economic system in 2023 will depend upon two elements: the variety of firms that may cease manufacturing on account of excessive power costs and the actions of the ECB,” he defined. Depending on the extent of rate of interest hikes to regulate inflation, the French economic system will develop “Epsilonesque” however constructive or not in 2023.

Barclays Bank, for its half, has determined: in its newest forecast printed earlier in the week, it predicts a 0.7% fall in France’s GDP (and 1.5% for Germany) subsequent 12 months. Investment ought to lower by 2% and consumption by 0.3%, which might enhance the unemployment fee from 7.3% to 7.7%.

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