• These projections generally confirm our assessment that the French economy will gradually emerge from inflation without suffering a recession. In the short term, the latest information available suggests a slight downward revision of growth for 2023 to 0.8%. However, we are maintaining our growth projections for 2024 (0.9%) and 2025 (1.3%) unchanged, and we are expecting growth of 1.6% in 2026. This acceleration in 2026 assumes that the effects of recent shocks to the French economy (external tax shock, tightening of monetary and financial conditions) will have abated by that time.
• Economic activity is expected to remain sluggish in 2024 before strengthening subsequently. In 2024, growth should be driven to a greater extent by household consumption, due to the fall in inflation, which will benefit the purchasing power of wages, and to the lower saving ratio. In 2025, growth should also benefit from enhanced private investment as the impact of tighter monetary and financial conditions will be weaker. In 2026, these trends should strengthen to generate a strong recovery.
• Headline inflation (HICP), which peaked in early 2023, is expected to continue to subside: after averaging 5.7% in 2023, inflation should fall sharply, to 2.5% in 2024. This projection has been revised slightly downwards compared with the September forecast. Headline inflation should decline substantially over the forecast horizon, helped by falling energy prices; core inflation (i.e. HICP excluding energy and food) should also come down, albeit more slowly. Provided there are no new shocks to commodity import prices, headline inflation should gradually come back towards 2% by 2025 at the latest, and then remain at a slightly lower level.
• The turnaround that we forecast in the labour market now appears to be underway. Over the next few quarters, following a time lag, employment is expected to adjust to the economic slowdown observed since late 2022, with only a partial recovery of past productivity losses. Consequently, the rate of unemployment should continue to rise, although it should stay under 8% in 2025, before resuming a downward trajectory as economic activity recovers.
• On the whole, in an uncertain environment, the risks to our projections appear to be slightly negative for economic activity and balanced for inflation.
