The Banque de France more optimistic for French growth in 2023

Thanks to a better "resilience" of the economy than initially expected, the Banque de France now rules out the risk of a recession in 2023 and should raise its annual growth forecast, its governor François Villeroy de Galhau said on Wednesday March 1. .

"Although in slowdown - expected - at the turn of winter 2022-2023 in France and Europe, activity is showing better resistance than anticipated", rejoiced the governor before the Finance Committee. of the National Assembly.

"The risk of recession that hung over our economies can now be dismissed, barring a major global event," he concluded, a few months after raising the possibility of a "limited" recession in France.

According to a common definition, a recession is characterized by two consecutive quarters of negative growth. However, France's gross domestic product (GDP) increased by 0,1% in the fourth quarter of 2022, and the Banque de France recently said it expected a "modest" increase in GDP in the first quarter of 2023.

On the basis of these new elements, "we forecast weakly positive growth in France for the year 2023 - a priori a little higher than the 0,3% that we had forecast in December - before an expected recovery in 2024", explained François. Villeroy de Galhau in front of the deputies.

“We will update our quarterly macroeconomic forecast on March 20,” he added.

If it is revised upwards, the Banque de France's annual growth forecast will be closer to those of the International Monetary Fund (+0,7%) and the government (1%).

In Parliament, the Governor also insisted that raising interest rates by the European Central Bank (ECB) in an attempt to control inflation "would not (lead to) recession, given the resilience activity and employment".

"On the contrary, it is a lasting inflation which would be the worst enemy of growth", he assured, while inflation has returned since 2022 to levels not seen for decades.

As food prices took over from energy prices as the main driver of inflation, the governor said it was a "temporary" phenomenon.

"The shock of food prices", which increased by 14,5% between February 2022 and February 2023 according to INSEE, "should gradually decrease by the end of the year", he said. anticipated.

On the business side, even though their production costs are rising due to inflation, most continue to repay state-guaranteed loans (PGEs) taken out during the Covid-19 pandemic without problems.

"Of the 143 billion euros which have helped nearly 700.000 companies, 46 billion have already been reimbursed," said the governor.