French growth should slow down more than expected due to the war in Ukraine

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published on Tuesday, April 12, 2022 at 9:02 p.m.

French growth is expected to slow more than expected in the first quarter of 2022, to 0.25%, the war in Ukraine already significantly penalizing several industrial sectors, the Banque de France estimated on Tuesday.

The French central bank lowered its previous growth forecast which was 0.5%, when INSEE was still counting in mid-March on an increase in gross domestic product (GDP) of 0.3% in the first quarter.

“After having returned to its pre-crisis level during the third quarter of 2021, earlier than the European average, GDP (gross domestic product) should continue to grow”, in the first quarter of 2022, but in a “more moderate way, due to of the international environment”, estimates the Banque de France in its monthly economic survey. In the last quarter of 2021, GDP grew by 0.7%.

This slowdown in the French economy seems to confirm that growth over the year will be much lower than the 4% initially forecast by the government, and the Minister of the Economy Bruno Le Maire has already indicated that the government will revise its forecast. shortly.

In mid-March, INSEE had indicated that it expected household consumption to fall by 0.5% in the first quarter, while their purchasing power should have fallen by 1.4% due to inflation. This is an element of concern for French growth, consumption traditionally being its main driver.

“The month of March was marked by the war in Ukraine, the first consequences of which are being felt on the French economy. In addition, faced with the resurgence of the Covid-19 epidemic, China has reintroduced containment measures in certain regions, which may have reinforced the supply difficulties”, companies, also explains the French central bank after having questioned more than 8,000 companies for its survey.

– “Slippery road” –

“The shock is much less brutal than the Covid shock of two years ago, but it could last longer and affect our growth and employment”, warned the governor of the Banque de France François Villeroy de Galhau in a interview with the newspapers of the Ebra group (L’Est Républicain, The Latest News from Alsace, Le Dauphiné Libéré, etc.).

“Undoubtedly, we are going to have to go through more difficult economic times. The French economy is moving on a road that has become more slippery,” he added.

If activity continued to progress in the first quarter, it was above all in the service sector, particularly in the hotel and catering industry, which is gradually recovering from the end of health restrictions linked to the epidemic.

On the other hand, in industry, the situation is more mixed. In February, French industrial production took observers by surprise, falling 0.9%, according to INSEE data, and the situation would have worsened further in March.

In the automotive industry, whose supply chains are badly affected by the conflict in Ukraine, 89% of companies surveyed by the Banque de France now say they are facing supply difficulties, 10 points more than in February .

Another consequence of the war is that agri-food companies are also experiencing supply problems, the country being a major supplier, particularly of sunflower oil and cake. They are now 59% to report difficulties, against 45% in February (+14 points), underlines the Banque de France.

For the month of April, the central bank points to a situation of “high uncertainty”, particularly in industry, even if companies are still expecting a slight growth in their activity. Services would remain well oriented, while construction companies foresee a “very slight drop” in their activity.

In addition to supply chain disruptions, inflation is a concern. It jumped to 4.5% in March, its highest level since the 1980s, boosted by soaring energy prices.

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