The French central bank said, on Thursday, that the French economy will slow sharply next year in the face of the energy crisis in Europe, with the risk of a “limited and temporary” recession in the worst case scenario.
The Bank of France said the eurozone’s second-largest economy is on track to expand this year by 2.6%, but growth will slow to 0.5% in 2023, under the reference scenario based on oil and gas futures prices.
But significant uncertainty about energy supplies and prices and the expected slowdown this winter means the central bank has preferred to set a range for economic growth next year between +0.8% and -0.5%, it said in its quarterly forecast.
“If a recession occurs, it will be limited and temporary with a sharp recovery in 2024,” Central Bank Governor Francois Villeroy de Gallo said in an interview with La Croix newspaper.
In its latest forecast in June, the central bank had started to grow by 2.3% this year and 1.2% next year. Meanwhile, the Finance Ministry forecast growth in 2022 this week of 2.7%, and 1% in 2023.
Looking further, the central bank on Thursday expected growth to recover as tensions in the energy market abate, reaching 1.8% in 2024.
The central bank saw inflation averaging 5.8% this year and in a range of 4.2% to 6.9% in 2023 depending on energy markets, before declining to 2.7% in 2024. The European Central Bank targets medium-term inflation of 2%. .
“We are very committed to bringing inflation down to 2% over the next two to three years,” Villeroy said.