French Economic Recovery Seen Cruising Through Election Season
French Economic Recovery Seen Cruising Through Election Season
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France’s economic recovery will continue through the first half of 2022 when voters head to the polls for presidential elections, according to forecasts from the country’s statistics agency.
Economic output in the euro area’s second largest economy will expand 0.4% in the first quarter and 0.5% in the second, driven above all by the services sector and consumer spending rising above pre-pandemic levels. Investment will continue to increase, albeit at a slower pace than in 2021, and exports will get a boost from ship deliveries.
The outlook is an asset for President Emmanuel Macron as he heads toward elections in April with his team seeking to show the government’s policies during Covid have preserved the economy’s strengths.
Persistent Inflation
Still, Insee cautioned that inflation -- which the government has sought to combat with measures including checks to households -- will persist at relatively high levels compared to those seen in the years before the pandemic. It expects France’s Consumer Price Index to peak at nearly 2.9% on year in December and decline only gradually to 2.7% in June.
Rural households have been hit particularly hard by the surge in energy prices, according to Insee. While that impact will fade in the first half of next year, inflation in the price of manufactured goods will keep up the pressure in early 2022, it said.
The agency’s business surveys show expectations of future prices are at record levels in several sectors, including industry.
Insee also said there are increasingly conspicuous reasons for uncertainty, including the possibility of renewed lockdown measures, the impact of the omicron variant on consumer behavior and the reaction of central banks to inflation.
“The economic situation is unique in many ways, and several risks could impact the forecasts, both on the upside and the downside,” Insee said.
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