PARIS (Reuters) – Growth in the French economy for the third quarter is now expected at the high end of the range initially indicated, as industrial activity accelerated in September and the hosting of the Olympic Games in Paris boosted services sector in August, show new forecasts from the Banque de France (BdF) published on Tuesday.
In its monthly economic survey carried out among 8,500 business leaders, the BdF notes, however, that the political crisis the country is going through and the uncertainty linked to the economic and budgetary policies of the new government, as well as the ongoing conflicts in the world , darken the outlook in France.
The new Prime Minister Michel Barnier, who faces his first motion of censure this Tuesday a week after his general policy declaration, must have the 2025 budget adopted in a deeply divided Parliament before the end of the year.
The euro zone’s second-largest economy is on track to record underlying gross domestic product (GDP) growth of 0.2% in the third quarter, compared with a previous estimate of between 0.1% and 0.2%, in the economic report published in September by the BdF.
The Olympics could add a quarter of a percentage point of growth to GDP, as activity has increased in hospitality, event management and security, particularly in the Paris region, the Bank of France reaffirms.
This effect, however, faded in September, with a slowdown in activity in the leisure, car rental, temporary work and hotel sectors, notes the central bank.
According to INSEE forecasts, published last month, the French economy is expected to grow by 0.4% in the third quarter, less than the 0.5% growth previously forecast, with the institute also highlighting uncertainties linked to the political situation.
INSEE then expects a contraction of 0.1% in French GDP in the fourth quarter and growth of 1.1% over the whole of 2024, as in 2023.
The BdF economic survey also shows that activity should remain strong in industry in October, but moderate in certain service sectors such as temporary employment and leisure.
The construction sector, however, remained weak in September with negative sentiment on order books.
Recruitment difficulties decreased only slightly, with 35% of companies reporting difficulties in September, compared to 36% in August.
(Written by Dominique Vidalon, Claude Chendjou, edited by Blandine Hénault)
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