Economists forecast zero growth in France in 2023

L'investissement des entreprises va pâtir de la hausse des factures d'énergie, des menaces sur les approvisionnements et de la remontée des taux d'intérêt.

Posted on September 14, 2022 at 6:45Updated on September 14, 2022 at 11:22 am

Recession? Stagnation? Anemic growth? In recent days, economists have also been running their models to update their forecasts for the French economy in 2023. And they are more pessimistic than the executive, who now has 1% growth next year and has pointed out his target for this year at 2.7%. According to them, economic activity should slow down in the coming months.

“The European and French economies will face a significant slowdown next year, and we cannot rule out a limited recession,” François Villeroy de Galhau, governor of the Banque de France, said late last week. The institution will announce its new projections this Thursday.

So far, commercial activity has certainly held up well, buoyed by an order book that is still well filled, and consumption has been supported by the excellent season achieved by restaurants and hotels.

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But summer has shuffled the cards. The new outbreak of fever in gas and electricity prices linked to the war in Ukraine now raises fears of a slowdown in industrial production. Some businesses have already downsized. Power rations are now on the table in case Russian deliveries are stopped. Faced with galloping inflation in the euro zone, the European Central Bank (ECB) has committed to amplifying the rise in its reference rates, proposing a series of new increases in the coming months.

“All the economic signs point in the direction of a weakening of activity,” observes Bruno Cavalier, chief economist at the Oddo BHF bank, who foresees “a stagnation” of activity in 2023. “Growth will be almost zero next year” , abounds Charles-Henri Colombier, director of the economic situation at the Rexecode institute. By then, the French economy will have gone through a technical recession in the last quarter of 2022 and the first of next year, according to the two experts.

“Risks at their highest point this winter”

“Winter promises to be the period when the risks will be greatest,” explains Bruno Cavalier. Between rising energy bills, threats to supplies and rising interest rates, “businesses are going to be very reluctant to spend in the coming quarters,” he says. Investment will be strongly affected.

As for household consumption, the main engine of the French economy, already at half-staff since the beginning of the year, it runs the risk of being further weakened by the application of a less generous tariff shield on gas and electricity from 1Ahem January 2023. Given the increase in their energy bill, the French will have less money to spend on other items. Rising interest rates are also likely to put a damper on your real estate investments.

“At the same time, world demand will be less favourable”, stresses Charles-Henri Colombier. Among other things, the probable entry into recession of Germany, France’s largest trading partner, should have negative effects on French exports.

Recession in sight according to Barclays

More pessimistic than his peers, Patrick Artus, economic adviser at Natixis, believes a recession in France next year is possible. “The scenario for the French economy in 2023 will depend on two factors: the number of companies that will stop producing due to high energy prices and the actions of the ECB,” he explains. Depending on the magnitude of the interest rate hikes it will undertake to curb inflation, the French economy will grow “Epsiloneque” but positive in 2023 or not.

Barclays Bank, for its part, has decided: in its latest forecasts published at the beginning of the week, it foresees a decrease in France’s GDP of 0.7% next year (and 1.5% for Germany). Investment should fall by 2% and consumption by 0.3%, which would cause an increase in the unemployment rate from 7.3% to 7.7%.

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