© Reuters. FILE PHOTO: Tourists walk in front of the Eiffel Tower in Paris, France, July 3, 2022. REUTERS/Benoit Tessier/File Photo

PARIS (Reuters) – France’s economy will grow slightly less than expected over the next two years due to weakness in its key trading partners, the central bank said on Monday, but raised its forecast for 2023 after a surprisingly strong second quarter.

The euro zone’s second-largest economy is expected to grow 0.9% this year, the Bank of France predicted in its quarterly economic outlook, revised up from 0.7% in June.

The improved outlook was mainly due to better-than-expected growth of 0.5% in the second quarter, boosted by the restart of refineries following strikes, the resumption of nuclear power production following maintenance and the delivery of an ocean liner.

Growth is forecast to reach 0.9% again next year, up from 1.0% in June, before rising to 1.3% in 2025, weaker than the 1.5% forecast by the central bank in June.

Although consumer spending is expected to improve in the next two years due to inflation subsidies, the weak outlook for the German economy – France’s main trading partner – and sluggish growth in China are likely to limit gains, the central bank said.

After peaking at 7.3% in February, France’s central bank forecast inflation would fall to an average of 5.8% this year, 2.6% next year and 1.8% in 2025 – just below the 2% forecast. Goal of the European Central Bank.

Lower inflation was expected to lead to higher real wages and potentially prompt households to set aside less after the savings rate rose to nearly 19% in the second quarter.

France’s central bank said employment would remain high this year, although a lag between the labor market and the broader economy would result in more jobs lost than created from next year.

The unemployment rate is estimated to rise from 7.2% this year to 7.5% in 2024 and 7.8% in 2025.

Source : www.investing.com

Leave a Reply

Your email address will not be published. Required fields are marked *