Political uncertainty could reduce French growth by 0.1 point of GDP in 2024 and by 0.2 point in 2025, according to OFCE
The political uncertainty arising from the dissolution of the National Assembly in June and the absence of a clear majority could reduce French growth by 0.1 points of GDP in 2024 and by 0.2 points in 2025, the French Observatory of economic conditions (OFCE).
In total, the institute expects, like the Government, a growth of 1.1% of the gross domestic product (GDP) in 2024. By 2025, the OFCE expects growth to slow down to 0.8%, that is , 0.3 points less than the executive’s forecast (1.1%). ).
While the government is committed to reducing the public deficit from 6.1% of GDP in 2024 to 5% in 2025, the OFCE highlights that efforts to restore public finances will reduce growth by 0.8 points of GDP. Its forecasters also predict that the public deficit will actually reach 5.3% of GDP by the end of 2025, and not 5% as the government had hoped.
On the monetary policy side, after a year in 2024 in which high interest rates are expected to reduce growth by 0.6 points of GDP, the rate reduction movement initiated by the European Central Bank (ECB ) should support growth at a maximum level of 0.4 points of GDP in 2025. Thus, the nature of the drivers of French growth “changes completely between 2024 and 2025, going from a negative effect of monetary policy and a positive effect of fiscal policy in 2024 to an inverse combination in 2025”summarizes the OFCE.
Inflation should reach 1.5% on average annually in 2025, after reaching 2% in 2024. Despite a slight drop in the individual purchasing power of the French in 2025 (-0.2% after +1, 1% in 2024), household consumption should be “main source of growth”. This would increase by 1.1%, almost double that in 2024 (+0.6%).
Read also |
