© Reuters. Facade of the Bank of France “Banque de France” headquarters in Paris, France, March 12, 2018. REUTERS/Charles Platiau/ File Photo
PARIS (Reuters) – The French economy will grow marginally less than expected this year on weaker consumer spending and investment, the central bank forecast on Tuesday, putting additional pressure on the strained public finances.
The euro zone’s second-biggest economy is set to grow 0.8% this year, the Bank of France said in its quarterly outlook, revising down its estimate from 0.9% in December.
Last month the government lowered its 2024 growth forecast to 1% from 1.4% previously and announced 10 billion euros in emergency budget cuts to keep its deficit reduction plans on target.
If growth proves to be closer to the central bank’s estimate, the government may have no choice but to scrape together extra budget cuts during the course of this year.
The independent public audit office warned earlier on Tuesday that the government’s budget deficit target looked optimistic and urged it to come up with another round of savings.
Offering some relief, the central bank said that the outlook for 2025 had improved, forecasting growth of 1.5%, up from 1.3% in December, with interest rate cuts boosting activity. In 2026, growth was seen at 1.7%, up from 1.6% in December.
The central bank also forecast inflation would average 2.5% in 2024, nearing the European Central Bank’s 2% target towards the end of the year. Inflation was seen averaging 1.7% in 2025 and 2026.
Drawing on its monthly business sentiment survey, the Bank of France said it expected quarterly growth of 0.2% in the first quarter of this year after 0.1% in the final three months of 2023.
