France: The Bank of France Still Lowers its Growth

The Bank of France again revised down its growth forecasts for the French economy, to 1.6% for 2018 and 2019, 0.2 points and 0.1 point lower than in its previous estimates, to take into account the sharp slowdown in the first half of the year.

It revised its forecast for the first time down in June, seeing the slow growth (0.2%) recorded in the first quarter as a “temporary backlash” after its effervescence end 2017 (+ 0.7%) .

INSEE has since announced that the GDP of France had moved at the same rate of 0.2% in the second quarter, leading the Bank of France to speak now of a “more marked than expected air hole” on the French market entire first semester.

“Beyond the short-term elements, the momentum is a little less in 2019, because of the less buoyant international environment, with in particular a downward revision of demand addressed to France”, estimates it, anticipating a quarterly growth rate of 0.4% from mid-2018.

For the same reasons, the European Central Bank slightly revised Thursday its growth forecasts for the euro area to 2.0% for 2018 and 1.8% for 2019 (against 2.1% and 1.9% previously)

The Bank of France is now at the bottom of the range of the forecasts on the GDP of France in 2018 and 2019, the government counting for its side on a growth of 1.7% in 2018 as in 2019.

On the employment front, the  The Bank of France anticipates net creations still dynamic in 2018 (245,000), a little less in 2019 (140,000), down compared to 2017 (330,000) due to the slowdown in growth but also from the decline in subsidized jobs.

But it does not change its expectations for the unemployment rate, which sees it return to 9.1% on average in 2018 and 8.8% in 2018.

Regarding inflation under HICP standards, the The Bank of France saw it accelerate to 2.1% this year, 0.1 point higher than previously forecast, mainly because of energy prices, then slow to 1.7% next year (+0.2 points compared to the June forecast) in 2019 before picking up again to 1.8% (unchanged) in 2020.

Core inflation, excluding energy and food, would rise steadily to 1.0% in 2018, 1.4% in 2019 and 1.5% in 2020.

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