PARIS (Reuters) – The French economy is expected to grow by 0.4% in the third quarter, less than previously forecast by INSEE, which highlights uncertainties linked to the political situation and the prolonged slowdown in the German economy despite the one-off positive effect of the Olympic and Paralympic Games.
In July, the statistics institute predicted growth of 0.5% for France’s gross domestic product (GDP) in the third quarter.
In its new economic report published on Monday, INSEE estimates that the Paris Games should have contributed positively by 0.3 points to French GDP over the period thanks to a recovery in household consumption linked mainly to the purchase of tickets for the events.
But the INSEE notes that the business climate has experienced a “turbulent summer” due to political uncertainties linked to the result of the early legislative elections and the absence of an active government.
“While growth has been mainly driven by foreign trade and public spending for three quarters, the political situation remains a major factor of uncertainty,” the institute writes.
“On the budgetary level, the short-term orientation remains to be clarified.”
The institute is also concerned about the economic situation in Germany, where recovery continues to be delayed. “A sharp recession would slow down French exports,” points out INSEE.
The institute is counting on a contraction of 0.1% in French GDP in the fourth quarter and on growth of 1.1% over the whole of 2024, as in 2023.
The government is counting on a 1% increase in GDP this year, but at the end of July, the resigning Minister of the Economy Bruno Le Maire estimated that growth would “probably” be higher than this objective.
In the second quarter, the economy grew by 0.2%, a slightly weaker pace than the previous estimate of 0.3%, INSEE added.
The decline in inflation should also continue, with the rebound in energy and food prices, the main contributors to inflation over the past three years, expected to remain contained.
Inflation is expected to come in at 1.6% in December, below the European Central Bank’s 2% target, with the underlying index expected to reach a similar pace by year-end.
(Written by Corentin Chappron, edited by Blandine Hénault)
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