Posted April 20, 2022, 7:15 am
The turbulence is still ahead of us. As elsewhere in the eurozone, the post-Covid economic recovery in France is starting to be held back by the effects of Russian war in Ukraine † Still, the slowdown there should be less brutal than in the other major economies.
For France, the International Monetary Fund (IMF) cut its growth forecast by 0.6 points on Tuesday from its January estimate, against a revision of 1.1 points for the eurozone and 1.7 points for Germany. The organization now expects a 2.9% increase in GDP in France this year. A sustained pace coupled with the strength of the recovery last year.
At the end of 2021, the growth overhang for the year 2022 was 2.4%. “There is an optical illusion”, agrees Gilles Moëc, chief economist at AXA, who predicts a GDP increase of 2.7% for 2022. he says. Thanks to its energy mix supplemented by the ‘tariff shield’ and the relatively weaker weight of the manufacturing industry, it is better armed than its neighbors in the eurozone. †
The forecasts of Philippe Waechter of Ostrum Asset Management are bleaker. According to him, French growth should be around 2.5% in 2022. “The IMF estimate for France is quite optimistic,” he said. It notes the slowdown in activity, but does not consider the idea of a lasting entry into a recession. †
uncertainties
In reality, uncertainty remains the key word at the start of the year when the clouds are closing. Since February 24, the repercussions of the conflict between Kiev and Moscow have impacted the economy through three channels: energy, rising prices and confidence. Added today is the threat of another clash with the Covid-related lockdowns in China.
The impact on business is already visible. Supply difficulties have increased again in recent weeks. 60% of manufacturers believe they are hindering production, according to the latest Banque de France business survey which lowered its growth forecast for the first quarter from 0.5% to 0.25%. In the car industry, factories in Le Mans and Douai are shut down for lack of the necessary components.
The invasion of Ukraine and Western sanctions against Russia are also clouding export prospects. French companies are likely to be impacted by the slowdown in the German economy, France’s main trading partner. “The point to keep an eye on is the dynamics of the labor market,” says Gilles Moëc.
Return to pre-crisis potential growth
The war in Ukraine and the price increases it causes are also weighing on the household confidence. Inflation, which reached 4.5% in France in March, should remain high for many months to come. Consumption, the main growth engine in France, could suffer. “There will be wage increases, but not enough to prevent a loss of purchasing power in 2022,” predicts Vincent Chaigneau, research director at Generali Investments. The latter, at this stage, forecasts a 3% GDP increase in France in 2022, thanks to a “limited year-end recovery, which would be short-lived, before activity expands into the second half of 2023.” would generally slow down”.
On Tuesday, the IMF also cut its growth forecast for France in 2023 from 1.8% to 1.4%. “It is significantly less than the average 2.3% expected in the eurozone”, notes Stéphane Colliac of BNP Paribas, who indicates “not to endorse this scenario”. “If there are no new shocks, France will return to its pre-pandemic potential growth next year,” notes Gilles Moëc for his part. 2023 would therefore be a year of normalization for the French economy.
