Will the clouds that hang over the tricolor economy finally dissipate? This Tuesday, the Banque de France unveiled its latest macroeconomic forecasts for the coming years. The institution is more optimistic compared to its publication of last March, in particular on the job market, which should resist particularly well to the slowdown in activity. The unemployment rate should not go back above the 8% mark, despite a delicate international environment, experts estimate.
“By 2025, the French economy would succeed in reconciling an exit from inflation and a gradual return to growth, without recession,” summarizes the Director General of Statistics, Studies and International at the Banque de France, Olivier Garnier. Growth, first, would gradually pick up again: after the shock caused by the war in Ukraine and the surge in inflation, it would reach 0.7% in 2023 on average, a level revised slightly upwards. It should then stand at 1% in 2024 and 1.5% in 2025, lower than expected estimates despite a recovery in household consumption and slightly lower oil and gas prices than expected in March. A dynamic explained by the troubled international environment.
At the same time, inflation does seem to have peaked this semester. Energy prices are falling, and food prices are beginning to slow, the experts note, with a nuance: “Historically, increases in food commodity prices are partially passed through and their declines are not accompanied by a fall in final prices but a halt in their rise”. In other words, don’t expect to see massive on-shelf price declines anytime soon. From now on, the rise in prices is mainly driven by services, “under the effect in particular of wage increases”. The Banque de France therefore forecasts an average annual rate of 5.6% this year, before a marked slowdown in 2024 – to 2.4% – and in 2025 – to 1.9%.
Despite relatively moderate growth, employment should hold up better than expected, notes the Banque de France. Surprised by the resilience of the labor market in recent months, analysts have revised their assumptions, leading to a “significant change” in their estimates. A decision which is based in particular on productivity calculations and on the pension reform, of which “the progressive increase in load from September 2023 would have a positive impact on the number of assets which would be gradually transmitted to employment” .
Initially, this year, the job market should resist, and the unemployment rate should stand at 7.1% on average. Then, the slowdown in activity would cause the rate to rise to 7.4% and then 7.6% over the next two years. A rebound, of course, but which should remain temporary and which is, above all, much less noticeable than expected. The 8% mark should therefore not be crossed and unemployment would remain well below its pre-Covid level.
Experts also expect a recovery in purchasing power: after an expected decline of 0.4% in 2023, it should rise again by 0.9% in 2024 and 0.5% in 2025. Enough to reach a level 2.8% higher than the pre-Covid period. “A good part of the gains” is explained by the rise in wages, which should remain dynamic in the years to come, explains Olivier Garnier.
Worried households, however, should keep a good part of their earnings warm under their mattresses. On this point, the Banque de France remains cautious: “We thought that the savings surplus could be mobilised, be a driving force for the economy. But we were rather negatively surprised”, consumers having remained cautious so far. The savings accumulated for months should therefore not be spent, except surprise – welcome for consumption, and therefore the economy.
However, a clear warning has been issued on public finances, whose improvement is long overdue… again and again. France remains an eternal dunce cap: if, between 2021 and 2025, the States of the euro zone must reduce their debt ratio by eight points on average, that of France would only fall by one point, depending on the institution. The divergence between Paris and the other capitals should therefore increase, given an unchanged policy. “The public debt ratio would not decrease and would remain close to 111% of GDP over the entire forecast horizon”, forecast the analysts. A worrying observation, which contradicts the promises of good management of public accounts brandished by the government.
