The Bank of France has forecast that the country’s economy will stagnate in the fourth quarter (Q4) of 2024, following a boost in the previous three months due to the Paris Olympics. This expectation reflects concerns that political uncertainty is affecting business confidence and the broader economic outlook.
According to the central bank’s monthly survey of company leaders in October, underlying activity is going to increase slightly by the end of the year. However, this growth will be due to a comparison to the third quarter, when the Olympics boosted output. As a result, a 0.2 percentage-point drop in expansion is anticipated.
Bank of France Predicts Economic Stagnation in Q4
This marks a notable shift, as it would be the first time in almost three years that France has not recorded economic growth in a quarter. The stagnation comes at a crucial moment for the French government, which is relying on the resilience of the economy to tackle a widening budget deficit. Sluggish tax revenues due to weak consumption and investment have strained public finances, adding to fiscal challenges.
Compounding the issue, ongoing political debates over significant tax hikes and spending cuts planned for next year have further dampened the business environment. The government, which holds a minority in parliament, faces stiff opposition to its proposed measures aimed at stabilizing the budget.
The Bank of France’s uncertainty index, which measures the business climate, remained elevated in October, reflecting concerns from business leaders about the country’s economic and fiscal direction. This heightened uncertainty stems from the political turmoil following snap elections in the summer, which has made it more difficult for businesses to plan for the future.
The current economic situation underscores the challenges France faces as it balances political instability with economic recovery.
For the analysis and updates, visit FXAN to stay informed on the latest news and insights. Also, follow us on Instagram.