Banque de France expects growth to stabilize in early 2023, avoiding sharp recession

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France’s economy is buckling in the face of threats – persistent inflation, notably the explosion in energy prices, post-Covid supply tensions – but not breaking. “Overall, I think the health of our economy is a little better than our collective morale.” Banque de France governor Francois Villeroy de Galhau announced this Wednesday, January 11, on Radio Classique. This will allow France “avoid a hard recession hard landing scenario”, he added.

Gross domestic product (GDP) growth should reach 0.1% in the fourth quarter of 2022. It suffers from the punishing effect of autumn holidays in oil refineries and nuclear power plant maintenance. “slight increase in December”, depending on the institution. GDP should be then “almost constant” in January.

“Continuity is confirmed and even extended”, Olivier Garnier, Director General of the Banque de France, who is in particular responsible for statistics, emphasized. “There is a high level of anxiety about the future (…), but despite everything, month-on-month, activity continues to pick up slightly, albeit less steadily than in the first half of 2022”.

Activity in industry, service and construction sectors continued to increase in December. That’s stronger than expected the previous month, according to the latest monthly survey of 8,500 business leaders conducted between Dec. 20 and Jan. 5. This is mainly due to mild winter temperatures and still order books, with fears over energy supplies easing, according to Olivier Garnier. “well stocked” despite the decrease. This is especially true for aeronautics, computer products and electrical equipment.

In January, activity in services and industries will advance slightly, but differences in strong sectors: a decrease in clothing or rubber-plastics, an increase in pharmaceuticals, automobiles or aeronautics. He would remain fixed in the building.

Inflation, supplies, stocks, energy: points of vigilance

In this halftone painting, “points of vigilance” As François Villeroy de Galhau pointed out, corporate cash, rising stocks, recruitment challenges and energy.

Like other major Western economies, France faces rising inflation that should peak in the first half of 2023, but its central bank “Slight moderation in industry price increases, if sustained” in December. However, there is no change in service and construction. for January, “Business leaders expect prices to rise sharply”, The bank, which states that some of them have moved to selling prices.

In December, supply difficulties eased, the cash position stabilized, but at a level “relatively low” employment in the industry remained difficult. Reserves remained flat and continued to increase “raised” especially due to reduced demand or supply difficulties or even fears of possible power shortages in the coming months.

Regarding the impact of the energy crisis on their activities in December, companies did not report any significant changes compared to the previous two months. So, 23% of them report that they were affected in December. However, 32% of them expect an impact over the next three months and even more fear their margins (52%).

Forecasts for 2022 and 2023 are kept

For all of 2022, the Banque de France confirms its growth forecast of 2.6% (vs. 2.5% for INSEE) before a sharp slowdown in 2023 to +0.3% under the baseline scenario. In the medium term, he expects an economic cycle with three R’s: resilience, slowdown and recovery from 2024. 2023 will be difficult, “We need to get back to a more normal course with less and less inflation and more growth.” then Francois Villeroy de Galhau, already estimated in December.

The government, which is supporting businesses and households with billions of euros, forecasts GDP growth of 2.7% in 2022 before slowing sharply to 1% this year. A scenario considered too optimistic by many economic institutions. And it’s far from 2021’s 7% anyway.

(via AFP)