The curves of the Banque de France are picking up color: according to the latest forecasts, France should experience growth of 0.6% in 2023, against 0.3% envisaged until then. Among the forecasts, the central bank is revising price increases downwards: “there is a little more growth and a little less inflation,” summed up the chief economist of the central bank, Olivier Garnier.
Food inflation should reach its peak “towards the end of the first half”, notes Matthieu Lemoine, one of the authors of the 2023-2025 macroeconomic projections published on Monday.
Prices would then increase more slowly, thanks to “the planned easing of the price of agricultural inputs (…) and the international prices of agricultural raw materials”, explains the institution. But “we do not expect a drop in food prices on the horizon of our projection”, that is to say 2025, warns Matthieu Lemoine.
These positive surprises are, however, offset by the country’s “financial environment”, with exchange rates and borrowing rates less favorable than in December. Even increased, the growth forecast for 2023 remains lower than those of the OECD (0.7%, raised by 0.1 point on Friday) and the government (1%).
No inflationary spiral in sight
These forecasts of activity and inflation are nevertheless dependent on “numerous risks”. “The indirect effects of the recent banking and financial volatility should be closely monitored, as recent events caused by the closure of Silicon Valley Bank in the United States or the uncertainty around Credit Suisse have reminded us”, details- she.
“There may be temporary effects from one quarter to the next”, acknowledged Olivier Garnier, but “when we reason over the multi-year horizon (…) it is not likely to significantly affect the projection”.
These uncertainties put aside, the Banque de France is therefore counting on a clear upturn in growth in 2024 (1.2% as anticipated in previous forecasts) and in 2025 (1.7% against 1.8%).
The average salary per head, which includes overtime and bonuses, should grow by 6% in 2023, 4.6% in 2024 and 3.7% in 2025, without purchasing power jumping in the same proportions. “This increase in wages should not lead to an inflationary spiral”, specifies the Banque de France. In terms of employment, the unemployment rate should experience a “transitory” increase in 2023 and 2024 before starting a “decline” again from 2025.