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French growth to slow to 0.3 pct in 2023: central bank

French economic growth will slow considerably in 2023 due to the energy crisis and inflation, before bouncing back in 2024 and 2025, the central bank forecast on Saturday.

Published: 18 December 2022 08:59 CET

This file photo taken on May 18, 2016 shows the logo of the Banque de France on its building in Paris. The Banque de France announced on December 16, 2022 that growth was expected to slow to 0.3% in 2023. Photo: PHILIPPE LOPEZ / AFP

GDP growth will slow from 2.6 percent in 2022 to 0.3 percent in 2023, according to the Bank of France’s “most probable” macroeconomic scenario for the next three years.

The slowdown in growth will be followed by a 1.2-percent rebound in 2024.

That is lower than the 1.8 percent previously anticipated, because “the winter of 2023-24 could still be a bit complicated due to the energy crisis”, director-general Olivier Garnier said.

The rebound will continue in 2025, when growth is expected to reach 1.8 percent, the bank said.

The forecasts remain highly uncertain though.

This is because of extremely volatile energy prices, geopolitical tensions — particularly the war in Ukraine — and uncertainty as to the evolution of Covid-19 in China.

The Bank of France’s outlook is less optimistic than that of the government, which forecasts 2.7 percent growth in 2022 and 1.0 percent in 2023.

“We can’t rule out a recession but if there is one it will be limited and short-lived,” Garnier said.

Oil and gas prices are expected to fall back from the peaks seen this year but remain high and continue to feed inflation, as will food prices.

Prices will have risen 7.3 percent by the end of 2022.

Inflation will continue to rise in the first half of 2023 before dropping back to 4.0 percent by end-2023 and 2.0 percent at end-2024, the BdF said.

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French bosses fear far right's vague economic plans

Federations are treading lightly with their public comments, aware that they could be sitting across the table from National Rally (RN) ministers if the party scores a major breakthrough in the June 30 and July 7 ballots.

Local business group U2P would “respect the people’s choice, but the RN has to say more precisely what it proposes on questions with a tax, social and economic effect on small firms,” its chief Michel Picon told AFP.

At the last presidential election in 2022, the outfit had warned that RN chief Marine Le Pen’s manifesto promises “would have bad consequences for business,” he recalled.

At stake are issues such as returning to an official retirement age of 60 — raised to 64 in a wildly unpopular Macron reform last year — and a still harsher crackdown on immigration.

“What does this mean for people working for us today?” Picon asked.

“We’re business players who don’t get involved in politics,” said Thierry Cotillard, head of the Mousquetaires/Intermarche supermarket chain.

But “whoever the politicians are, we will fiercely defend our positions,” he warned.

‘Stick your neck out’

Centrist Macron’s time in office has been marked by reforms aimed at making life easier for businesses and high-profile courting of foreign investment.

By contrast, “we know nothing” about the RN’s plans, said the head of one major European industrial firm’s French subsidiary on condition of anonymity.

“We’ve just seen the beginnings of a reindustrialisation for 10 years, with supply-side policies bearing fruit. Will all that be kept up?” he asked.

Macron’s Finance Minister Bruno Le Maire on Tuesday urged business to “stick their neck out” against the far right.

Groups including the big companies’ federation MEDEF should “clearly say what they think of the different parties’ economic programmes” and warn about “the cost of Marine Le Pen’s Marxist plans”, he added.

Without naming any party, MEDEF told AFP in a statement that “a new campaign is starting in which we do not share certain political visions, which are incompatible with business competitiveness and prosperity for our country and fellow citizens”.

The CPME small-business group called for supply-side policy, greenhouse emissions reduction and welfare state reforms to continue.

It also warned about France’s staggering €3 trillion debt pile, which ratings agency Moody’s said Monday risked a downgrade due to the “potential political instability” from the upcoming election.

“Anyone taking on costly reforms without taking this element into account would be exposing France to a major risk,” the CPME said.

The head of a firm on France’s heavyweight CAC 40 stock market index, also speaking on condition of anonymity, said there was no reason to panic as the RN winning was “not a done deal”.

Even if they did, they said, “everyone wants to upend things, but once in power, being responsible for things will make you responsible.”

‘Low-carbon electricity essential’

One sector with particular fears for a far-right victory is renewable energy, which has already been waiting for months on a government roadmap stretching to 2035 and including items like sites for massive offshore wind parks.

“What’s going on is serious,” said Jules Nyssen, president of the Renewable Energies Union (SER).

“We’re in a state of total instability, just when we need legal guarantees and clarity,” he added, saying “it’s going to cost us heavily”.

“We have a clear roadmap that we need to eliminate carbon emissions,” said Nicolas de Warren, president of the UNIDEN association of big industrial energy users.

“What’s essential for us is access to low-carbon electricity at competitive prices, whether it’s nuclear or renewable”.

In 2022, Le Pen promised a fleet of around 20 new nuclear reactors — although her 2031 timetable for delivering half of those was seen as unrealistic.

But she is also a committed opponent of wind energy, vowing a moratorium on new construction and the gradual dismantling of existing parks — plans incompatible with France’s climate commitments.

“The laws of economics and energy will catch up” with the RN if it comes to power, one electricity provider said on condition of anonymity.

“We need more cheap energy. Building nuclear takes 10-15 years. What do we do while we wait? And how do we attract battery factories if we don’t want any more electric cars?” he added, citing another of Le Pen’s bugbears.

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