PARIS (Reuters) – The French economy got a boost in August from the services sector with the hosting of the Olympic Games, but the ongoing political crisis is clouding the outlook for the euro zone’s second-largest economy, the Bank of France (BdF) said in its monthly business survey on Tuesday.
The BdF is counting on underlying growth in France’s gross domestic product (GDP) of 0.1% to 0.2% in the third quarter, a forecast unchanged from that given in August.
The Olympics could add a quarter of a percentage point of growth to GDP, with activity increasing in hospitality, event management and security, particularly in the Paris region, the BdF said.
“It should nevertheless be stressed that this forecast is subject to risks, both upwards and downwards, due to the dual uncertainty over the impact of the Olympic Games, on the one hand, and the impact of the political environment on the behavior of companies, on the other hand,” warns the BdF.
According to INSEE forecasts published on Monday, the French economy is expected to grow by 0.4% in the third quarter, less than the 0.5% growth previously expected, with the institute also highlighting uncertainties related to the political situation. INSEE then expects French GDP to contract by 0.1% in the fourth quarter and grow by 1.1% for the whole of 2024, as in 2023.
The BdF’s economic survey, carried out among 8,500 business leaders, also shows that activity has remained weak in sectors with the exception of services.
The manufacturing sector is particularly struggling due to slowing demand for electric vehicles and supply chain issues for transportation equipment manufacturers.
The construction sector, for its part, remains fragile, with business leaders expressing concerns about the continuation of the political crisis which is weighing on decisions regarding new investments and public contracts.
Recruitment difficulties also increased slightly, with 36% of companies reporting tensions in August, compared to 33% in July.
(Reporting by Leigh Thomas; Editing by Kate Entringer)
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