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    Home - Business Briefing - French central bank cuts 2025 growth forecast to 0.9%
    Business Briefing Updated:December 17, 2024

    French central bank cuts 2025 growth forecast to 0.9%

    By Frank Deux3 Mins Read
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    French central bank cuts 2025 growth forecast to 0.9%

    France’s central bank on Monday, December 16, downgraded its 2025 growth forecast to 0.9% from 1.2%, 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% – 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%, 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 Olivier Garnier, Banque de France director general of statistics, studies and international affairs.

    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.

    Read more Subscribers only The specter of Barnier government collapsing sends shivers through the markets

    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% of output this year to 5% next year.

    The central bank is expecting the public deficit to come in at between 5% and 5.5% of GDP 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% this year, then 1.6% in 2025, 1.7% in 2026 and 1.9% in 2027. It also expects the labor market to “begin to enter a transitional slowdown phase” and remain there across 2025.

    The French jobless rate is expected to peak in 2025 and 2026 while remaining below 8% and “then fall again in the wake of the recovery in activity.”

    But it warned that its predictions had to be couched amid ongoing uncertainties linked to the febrile political situation.

    Le Monde with AFP

    French central bank cuts 2025 growth forecast to 0.9%

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    France featured French central bank French economy French growth forecast French news Le Monde Prime Minister
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    Frank Deux

    Frank Deux is an editor at the French news desk for WTX news.

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