Overview
The Bank of France has trimmed its projection for French economic growth in 2026 to 0.5%, down from a prior estimate of 0.9%.
Main drivers cited by the central bank
Officials pointed to a weaker-than-expected start to the year - an unforeseen 0.1% contraction in the first quarter - and to higher global energy prices following the outbreak of the Iran war in late February. The bank said those developments underpin the downward revision.
The central bank based the baseline projections on oil futures prices as of May 21. Those futures did not incorporate subsequent Middle East developments, including a peace agreement that has since pushed oil prices down to three-month lows.
Short-term outlook
Growth is forecast to be flat in the current quarter. The Bank of France's monthly poll of 8,500 firms reported that business executives registered an improvement in June compared with May, a signal the central bank considered when framing its near-term view.
Medium-term projections
Beyond 2026 the central bank adjusted its forecasts upward. It raised the 2027 growth projection to 0.9% from 0.8% and expects growth of 1.2% in 2028, citing a recovery in consumer spending and business investment as inflation and energy price pressures ease.
Inflation is now projected to average 2.5% in 2026, before moderating to 1.7% in both 2027 and 2028 as energy prices normalize. By contrast, the March forecast had envisioned inflation of 1.7% in 2026, 1.4% in 2027, and 1.6% in 2028.
Household consumption and price pressures
The central bank highlighted that elevated inflation this year is eroding household purchasing power and constraining consumption. It expects consumption to rebound next year as price pressures subside.
Alternative scenarios and uncertainty
Alongside its baseline, the Bank of France published alternative scenarios that show the possibility of weaker growth and higher inflation than in the baseline, driven by heightened geopolitical uncertainty. These scenarios underline the sensitivity of the outlook to energy market developments and geopolitical events.
Conclusion
The revision to 2026 growth reflects both a domestic slowdown in the opening quarter and externally driven energy cost increases. While the central bank anticipates gradual improvement in the medium term through recovering consumer spending and investment, it also notes that geopolitical volatility could produce worse outcomes for growth and inflation than currently forecast.