PARIS (Reuters) – French economic growth is set to be stronger than expected this year, and inflation a little less painful than expected, as the shock to energy prices begins to subside, said on Monday. the Bank of France.

The eurozone’s second-largest economy is expected to post growth of 0.6% this year, the central bank added in its quarterly forecast, an improvement from its previous forecast of +0.3% published in December.

Despite this improvement, the new forecast would remain below the assumption of 1% growth on which the government based its 2023 budget.

Inflation calculated using a basket of goods and services harmonized at European level is now expected to average 5.4% this year, lower than the forecast of 6.0% made in December, thanks to a decline in commodity prices since that date.

Inflation should settle down in particular from the second half of the year, after the 15% jumps in regulated gas and electricity prices recorded at the start of 2023 and the 10% increase in prices negotiated between the major food distributors and their suppliers since early March.

The central bank clarified, however, that its forecasts had been finalized in early March and that they could be conditional on the renewed uncertainty observed in recent days on the financial markets because of concerns about the health of the global banking sector.

In the longer term, the Banque de France expects the economy to reaccelerate once the impact of the energy crisis has passed, with growth forecast at 1.2% in 2024 and 1.7% in 2025.

Inflation, meanwhile, should continue to decline with an average rate of 2.4% in 2024 and 1.9% in 2025, returning in line with the 2% target set by the European Central Bank (ECB). for the twenty countries of the euro zone.

In the labor market, an increase in the unemployment rate is expected to rise to 8.1% in both 2024 and 2025, against a forecast of 7.5% this year, a consequence of the delayed effect of the slowdown in growth and business productivity gains in 2023.

(Leigh Thomas, Gilles Guillaume for the , edited by Kate Entringer)

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