PARIS (AFP) – France’s central bank downgraded its 2025 growth forecast to 0.9 per cent from 1.2 per cent, citing “increased uncertainty” for the economic outlook both at home and abroad.
The bank also reduced its forecast for 2026 by 0.2 percentage points to 1.3 per cent – a figure it also expects for 2027.
The latest forecasts come two days after Moody’s downgraded France’s credit rating to Aa3 on the back of months of political crisis and a budget standoff that brought a change of prime minister.
For 2024, the bank maintained its projection at 1.1 per cent, as in 2023, based on a fourth quarter of zero growth.
The new macroeconomic projections have been made “in a national and international context of increased uncertainty”, explained Banque de France director general of statistics, studies and international affairs Olivier Garnier.
The figures laid down on November 27, a week before a motion of no confidence passed against the outgoing Michel Barnier-led government, come amid bitter wrangling over next year’s budget.
That is expected to see tax rises and tens of billions of euros of spending cuts to bring about a “significant” reduction in the public deficit, supposed to fall from 6.1 per cent of output this year to five per cent next year.
The central bank is expecting the public deficit to come in at between 5.0 and 5.5 per cent of gross domestic product next year.
Its reference scenario was that of “an exit from inflation without recession” albeit with recovery postponed to 2026 and 2027 by comparison with previous projections.
This would foresee the knock-on effect of expected tamer inflation and the loosening of monetary policy, with European Central Bank rates having started to fall since June.
The bank expects inflation – based on a harmonised index to permit European comparisons — to come in at 2.4 per cent this year, then 1.6 per cent in 2025, 1.7 per cent in 2026 and 1.9 per cent in 2027.
It also expects the labour market to “begin to enter a transitional slowdown phase” and remain there across 2025.
