The government is revising its growth forecasts downwards due to the conflict in the Middle East

As part of its updated budget trajectory, which France is preparing to send to the European Commission in Brussels, the government of Sébastien Lecornu is now forecasting growth of 0,9% in Gross Domestic Product (GDP) in 2026, compared to 1% previously, the Ministry of Economy announced on Tuesday.

This forecast aligns with that of the Bank of France published at the end of March, as well as with the "carry-over growth" estimated by INSEE for mid-2026, that is, the level of annual growth that would be achieved if economic activity remained stable in the second half of the year. In a context marked by geopolitical tensions, "a very moderate effect is expected on growth, which remains preserved and driven by its momentum from last year and by our improved protection and greater energy independence," commented Economy Minister Roland Lescure, quoted by his ministry.

Rising inflation and energy uncertainties

Meanwhile, the government raised its inflation forecast to 1,9% for 2026, up from 1,3% previously. According to Roland Lescure, "despite the energy shock and the major increase in oil prices," the price rise would remain "limited," thanks in particular to the efforts undertaken in decarbonization.

These projections are based on market assumptions as of March 23, including an oil price of around $100 until the end of May, according to the Ministry of the Economy and Finance. However, the ministry emphasizes that "the risks surrounding the growth forecast are significant," particularly due to the volatility of energy markets linked to the war in the Middle East.

An alternative scenario was thus studied, with the price of oil reaching "$150 a barrel for the next three months" before a gradual decline. Under this hypothesis, the impact on the French economy could "reach up to 0,9 points of GDP compared to a scenario without conflict," according to the Ministry of the Economy and Finance.

Public deficit: course maintained despite the crisis

Despite this uncertain context, France is maintaining its forecast of a public deficit of 5% of GDP this year, after 5,1% in 2025. The government also reaffirms "its commitment to bringing the deficit below 3% in 2029", in accordance with the European requirements of the Stability Pact.

Bercy insists, however, on the necessary caution: "macroeconomic uncertainty requires us to be cautious about our budgetary management, because the crisis is generating a significant increase in debt service," with an estimated cost "around 4 billion" euros.

This data will be included in the annual progress report that France must send to Brussels before the end of April, a key document for updating the medium-term budgetary and structural plan (PSMT) for the period 2025-2029.

Enhanced monitoring of public finances

In this context, the Ministry of the Economy has consulted the High Council of Public Finances (HCFP) ahead of the alert committee meeting scheduled for April 21. According to the Minister of Public Accounts, David Amiel, this meeting "will be an opportunity to take stock of the consequences of the crisis on public finances."

It will also "help inform decisions to be made" in the event of "possible management measures" to be adopted during the year, Bercy emphasizes.

The forecasts will also be presented to the "circle of forecasters", a body bringing together administrations, economists and experts, created to strengthen the management of public accounts after the budget overruns of 2023 and 2024.

Finally, France remains under European surveillance as part of an excessive deficit procedure initiated in July 2024. The European Commission has given it until 2029 to bring its public deficit below the threshold of 3% of GDP.

Illustrative image of the article via Depositphotos.com.