The latest forecast of France shows that the economy is predicted to slow down during the last few months of 2022 and 2023 due to severe supply disruptions, as well as higher inflation brought in by the energy crisis.
There will be a remarkable increase in inflation which will take place over the next few years. Total inflation rates will be 5.8% in 2022, 4.4% in 2023, and 2.2% in 2024. This is predominantly expected because of the measures adopted by the general government to try and combat higher energy prices sweeping Europe.
After a strong rebound of GDP in 2021 of 6.8, the real expansion is only to be 2.6% across 2022. Big disruptions to growth continue to plague the French economy as a result of rising inflation which continued disruptions to supply chains and higher energy prices.
As we enter into 2023, the first quarter is expected to be a mild contraction. There will likely be a fall in investments owing to higher production costs and resultant uncertainty. However, there is a projected moderation regarding inflation which will allow for a recovery in the second half of 2023.
Broadly speaking, the French economy is predicted to continue gaining momentum until the end of 2024, thanks to the ongoing moderation of energy costs and things settling down.
The slow return to form is typically expected to be driven by domestic demand, in contrast to the contribution of net exports, which will have their overall impact become negative. GDP is expected to grow by roughly 1.5% during 2024 as a result of these changes.
Despite 2024 being a positive year for France, the earliest it will have to successfully navigate through is 2023, a year plagued by inflation.
With inflation set to rise to 5.8% in 2022, a sharp jump up from 2.1% of the previous year, clear challenges are ahead. The big factor in this jump is the cost-push inflation of energy. However, as these prices coupled with rising wages are expected to pass through the economy onto non-energy services and goods, the country's core inflation will speed up in the next few quarters and stay at a pretty high level. For this reason, the expected level of inflation will be 4.4%.
To conclude, the financial forecast of France at this period is going to get stormier before they get sounder. 2024 is going to be a favorable year for the French economy, but to get there, it will have to battle through all the difficulties of 2023.
Higher inflation and energy prices will doggedly pursue France through the next year. The preventative measures introduced by the French government will be the verified linchpin in deciding whether the economy can grow and thrive during a difficult period.