French central bank predicts slowdown next year, risk of recession

Price tags are seen as women shop at a local market in Nice, France, June 7, 2022. REUTERS/Eric Gaillard

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PARIS, Sept 15 (Reuters) – The French economy will slow sharply next year in the face of the European energy crisis, with a “limited and temporary” risk of recession in the worst case, the central bank said on Thursday.

The eurozone’s second-largest economy is on track for a 2.6% expansion this year but growth will slow to 0.5% in 2023, the Banque de France said, under its price-based baseline scenario. recent oil and gas futures.

But the high uncertainty surrounding energy supply and prices and an expected slowdown this winter have led the central bank to prefer to show a range of economic growth next year between +0.8% and -0.5 %, it said in its quarterly outlook.

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“If a recession is to occur, it will be limited and temporary with a strong rebound in 2024,” central bank governor Francois Villeroy de Galhau said in an interview with La Croix newspaper.

In its latest June forecast, the central bank forecast growth of 2.3% this year and 1.2% next year. The Ministry of Finance meanwhile forecast this week a growth of 2.7% in 2022, and 1% in 2023.

Looking further ahead, the central bank forecast on Thursday that growth would pick up as tensions in energy markets ease, to 1.8% in 2024.

The central bank has seen inflation hit 5.8% on average this year and range between 4.2% and 6.9% in 2023 depending on energy markets, before falling back to 2.7% in 2024. The European Central Bank is targeting medium-term inflation of 2%.

“We are firmly committed to bringing inflation back towards 2% in the next two to three years,” Villeroy said.

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Reporting by Leigh Thomas; Editing by Catherine Evans

Our standards: The Thomson Reuters Trust Principles.

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