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

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 is already significantly penalizing several industrial sectors, the Banque de France estimated on Tuesday.

The French central bank lowered its previous growth forecast of 0.5%, when the INSEE still had in mid-March 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, before the European average, GDP (gross domestic product) should continue to grow”, in the first quarter of 2022, but in a “more moderate, due to the international environment”, estimates the Banque de France in its monthly economic survey. In the last quarter of 2021, GDP grew by 0.7%.

The slowdown in the French economy seems to confirm that the croissance will be well below the 4% forecast initially by the government, and the Minister of the Economy Bruno Le Maire told the ailleurs that he indicated that the government will review his forecast Coming soon.

In mid-March, INSEE had indicated that it expected household consumption to fall 0.5% in the first quarter, while their purchasing power should have fallen 1.4% due to inflation. This is an element of concern for French growth, with 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 in the French economy. In addition, in the face of the resurgence of the Covid-19 epidemic, China has reintroduced confinement measures in certain regions, which may have reinforced supply difficulties,” the French central bank also explains after having asked more than 8,000 companies for their poll.

– ‘Slippery road’ –

“The shock is much less brutal than that of Covid 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 an interview with the Ebra newspapers. . (L’Est Républicain, The latest news from Alsace, Le Dauphiné Libéré, etc.).

“Without a doubt, we are going to have to go through more difficult economic times. The French economy is going down an increasingly slippery path,” he added.

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

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

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

Another consequence of the war is that agri-food companies are also experiencing supply problems, with the country being an important supplier, particularly of oil and sunflower cakes. Now there are 59% who report difficulties, compared to 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, although companies still expect a slight growth in their activity. The services would continue to be well oriented, while the construction companies foresee a “very slight fall” 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, fueled by rising energy prices.

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