The Bank of France has revised its growth forecasts for France downwards due to the war in the Middle East.

The Bank of France now forecasts, in its baseline scenario, a growth of Gross Domestic Product (GDP) of 0,9% in France in 2026, slightly lower than the 1% anticipated in December, after already 0,9% in 2025. This adjustment reflects a more uncertain economic context, marked in particular by the rise in energy prices and tensions related to the war in the Middle East.

"The French economy is starting from a better position than expected at the end of 2025 and the beginning of 2026," emphasizes Bank of France Governor François Villeroy de Galhau in an interview with Les Echos. According to him, the French "have increased their resilience to face uncertainty." Economic activity should therefore remain dynamic "also in the first quarter of 2026, based on the latest available business surveys." However, the Bank of France believes that "rising energy prices and the deteriorating geopolitical context will subsequently weigh on the French economy."

Inflation in France: 1,7% expected in 2026

In its central scenario—considered the most favorable, with a temporary rise in hydrocarbon prices and a relatively rapid resolution of the conflict—the Bank of France has also revised its 2027 growth forecast downward to 0,8%, compared to 1% previously. The French economy could then rebound in 2028 with growth of 1,2% (compared to 1,1% previously), "driven by a rebound in exports and private domestic demand."

On the inflation front, the HICP (Harmonized Index of Consumer Prices) is expected to reach 1,7% this year, compared to the 1,3% forecast in December (after 0,9% in 2025). Inflation is then expected to slow to 1,4% in 2027 "in a context of easing energy prices," before rising slightly to 1,6% in 2028.

These forecasts are based on assumptions made on March 11, with the price of oil reaching $92 a barrel in the second quarter of 2026, before stabilizing around $70 from mid-2027. However, the Bank of France acknowledges that energy prices have increased since then.

"Faced with a particularly uncertain context linked to the conflict in the Middle East, we must keep a cool head and consider various scenarios," François Villeroy de Galhau told Les Echos. The governor nevertheless sought to reassure: "We, the central banks, will do what is necessary to bring inflation back to a maximum of 2% in 2027 and 2028."

War in the Middle East: Worsening economic scenarios

The Bank of France has also developed two more adverse scenarios, incorporating more pronounced and sustained increases in hydrocarbon prices, with a direct impact on the French and European economy.

The intermediate scenario forecasts a 40% reduction in oil and liquefied natural gas (LNG) flows transiting the Strait of Hormuz in the second quarter of 2026. In this case, inflation would reach 2,5% this year, while growth would be limited to 0,6% in 2026 and 0,8% in 2027, before rebounding to 1,2% in 2028.

The worst-case scenario assumes a 60% drop in these flows and permanently damaged infrastructure, leading to a surge in oil prices to a temporary peak of $145 a barrel. Inflation would then climb to 3,3% in 2026, while growth would fall to 0,3%, then 0,4% in 2027 and 1,5% in 2028.

"The longer the conflict lasts, the higher oil prices will soar, and the more negative the effects will be on the French and European economies," the governor explained in the pages of Les Echos. However, he insisted: "In no scenario, however, do we foresee a recession for France."

France would thus avoid recession in 2026, "and in 2027, and in 2028", even if "growth is slowed", François Villeroy de Galhau also stressed during the France 2 news broadcast.

By revising its projections, the Bank of France is following in the footsteps of INSEE, which recently lowered its growth forecasts for the first half of 2026 to 0,2% for each of the first two quarters, compared to 0,3% previously.

Illustrative image of the article via Depositphotos.com.