After the pandemic, the war in Ukraine penalizes the French economy

Barely recovered from the Covid 19 pandemic, the French economy will be penalized by the war in Ukraine which should slow growth while accelerating the rise in prices, according to the Banque de France on Sunday.

French growth should thus be cut in 2022 by 0.5 to 1.1 percentage point compared to what would have happened without the conflict, estimates the institution.

The French gross domestic product (GDP) will progress by 3.4% if the price of oil averages over the year at 93 dollars, but by only 2.8% if this price reaches 119 dollars. Without the war, growth would have been 3.9%, estimate central bank economists.

Banque de France chief executive Olivier Garnier clarified at a press conference that both scenarios were “possible”, adding that he was unable “to say which is more likely” and that there could be some. have others. The Banque de France has thus not calculated the effect that a halt in Russian gas and oil supplies would have.

For the euro zone as a whole, the European Central Bank (ECB) had already lowered its growth forecast for 2022 from 4.2% to 3.7% on Thursday.

– Industry more affected –

The Banque de France specifies that before the outbreak of the war, it had planned to raise its 2022 forecast for France from 3.6% to 3.9%, after having revised upwards to 2.4% the acquis of growth at the end of 2021.

And according to its economic report also published on Sunday, GDP continued to grow in February to reach a level of 1.75%, higher than that of the pre-crisis two years earlier.

But growth will taper off as the year progresses.

The central bank then forecasts growth of 2% in 2023 then 1.4% in 2024 in the “conventional” scenario, and 1.3% then 1.1% in the so-called “degraded” scenario.

The brake comes when “we had not yet found our potential growth trajectory” before the health crisis, underlined Mr. Garnier.

“The shock overall is less strong than during the first confinement of the year 2020 but it is part of a longer duration”, explained Matthieu Lemoine, economist of the central bank.

“With the Covid, it was the services that had been affected; this time it is more the industry. Before the war, it already had supply difficulties, which should gradually dissipate this year. In the short term , we are unfortunately not going to see this improvement”, estimated in an interview with Parisian the governor of the Banque de France, François Villeroy de Galhau.

– three negative shocks –

The consequences of the Russian invasion of Ukraine will also be felt in prices, the harmonized index of consumer prices (HICP), which should reach 3.7% this year, according to the first scenario, and 4, 4% depending on the second.

This inflation indicator, which allows comparisons at European level and takes energy prices into account more than the national consumer price index (CPI) put forward by INSEE, rose to 4.1% over one year in France in February but should, according to forecasts made before the war, return to around 2% before the end of 2022.

Olivier Garnier recalled that inflation averaged 5.8% in the euro zone and estimated that that of France would be just as high without the tariff shield put in place by the government on gas and electricity prices. ‘electricity.

The central bank now expects inflation to decline to 1.9% in 2023 and then to 1.7% in 2024 in the conventional scenario, but remain high at 3.3% next year before to fall to 1.5% in 2024 in the scenario based on durably very high energy prices.

The negative shocks on the French economy of the conflict are on the whole of three orders: increase in the prices of energy and raw materials, reduction of consumption and investment, as well as a reduction in the demand addressed to the France which will affect foreign trade, further indicates the Banque de France.

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