PARIS (Reuters) -France’s economy will grow marginally faster than previously expected this year as rebounds in the aeronautics industry, tourism, real estate and agriculture offset weak consumer spending and business investment, the national statistics agency forecast on Thursday.
INSEE’s outlook offers some rare good news for the euro zone’s second-biggest economy, where the re-emergence of political uncertainty has refocused ratings agencies’ and investors’ attention on France’s huge public debt.
However, INSEE warned that growth was benefiting from the temporary boost of companies rebuilding their inventories after two years of drawdowns rather than from consumer spending, the usual motor for the economy.
It forecast France’s economy would grow 0.8% this year, down from 1.1% in 2024, but better than the 0.6% it expected previously. The forecast is also better than the 0.7% expected by the government, which is due to update its economic estimates in the coming days in preparation for the 2026 budget.
On a quarterly basis, INSEE estimated the economy would grow 0.3% in the third quarter from the previous three months and then 0.2% in the final quarter.
It warned, however, that political uncertainty could weigh on activity if it persists after the collapse of former prime minister François Bayrou’s minority government following a no-confidence vote on Monday.
Consumers, for instance, have already been saving any spare cash rather than spending the purchasing power gains created by low inflation, which was forecast to average only 1% this year.
Unemployment fears, the highest in 10 years outside of the COVID period, are also weighing on households’ spending decisions, although the jobless rate is expected to rise only slightly to 7.6% by the end of the year, INSEE said.
(Reporting by Leigh Thomas; Editing by Hugh Lawson)
Comments