In France, 2023 growth is doing honorably despite three quarters at zero

French GDP finally increased by 0.

In France, 2023 growth is doing honorably despite three quarters at zero

French GDP finally increased by 0.9% in 2023, INSEE announced on Tuesday, close to the government's forecast of 1%, but at an atypical pace, with a very good second quarter and the other three zero.

Growth in gross domestic product thus remained sluggish from October to December, as in the first and third quarters (revised from 0.1 point to 0%), while the second was much more flamboyant, at 0.7%. (also revised by 0.1 point).

This good quarterly growth occurring almost at the start of the year, as well as a contribution of 0.3% from 2022, allows us to achieve an increase in GDP of 0.9% over the entire year.

“We can see the glass half empty,” commented Tuesday on France Inter the director general of the National Institute of Statistics, Jean-Luc Tavernier, “with indeed a fairly significant slowdown during the year 2023; or the glass half full, we're getting through this without a recession" despite a context of inflationary crisis.

France is also doing better than the euro zone in general, whose growth reached 0.5% over the past year, and than Germany which could experience two successive years of recession, after -0.3%. as for her in 2023.

The fourth quarter was, however, marked by a drop in business investment (-0.7% after 0.2% in the third quarter) and household consumption (-0.1% after 0.5%).

Conversely, foreign trade contributed positively to GDP growth in the fourth quarter. But this is less due to exports, barely stable (-0.1% after -0.6%), than to imports in sharp decline (-3.1% after -0.4%).

For Maxime Darmet, French economist at Allianz Trade, "it is difficult to see positive elements in this report" from INSEE, "with an economy that is stagnating in four of the last five quarters".

“What is worrying is the decline in domestic demand,” he observes, with “household consumption still not picking up, and especially business investment which is finally giving way.”

- "Reason for hope" -

Mr. Darmet particularly notes the 0.8% decline in business investment in manufactured products in the fourth quarter: "there is no reindustrialization, unlike what is happening in the United States", laments- he.

For the future, everything depends on a recovery in household consumption. The latest INSEE economic survey showed a renewed appetite for purchases.

“This is a reason for hope for 2024,” said Mr. Tavernier.

The institute sees inflation returning to 2.5%, over one year at the end of June, and even around 2% if we exclude the products with the most volatile prices.

Despite these hopes, and against a backdrop of unemployment which could rise slightly, according to INSEE, the government forecast, which dates from last September, of growth of 1.4% this year seems more than optimistic.

Mr. Tavernier saw on Tuesday a possible acceleration at the end of 2024, but “probably not to the extent of going to 1.4%”.

Allianz Trade has a forecast of 0.7%, like many economists. The Banque de France rather anticipates 0.9%, the OECD 0.8%.

Also on Tuesday, the International Monetary Fund (IMF) lowered its own forecast, from 1.3% to 1%.

At its forecast horizon, at the end of June, INSEE anticipates 0.2% growth in the first two quarters. At this rate and with an expected growth of 0.1% in 2023, even two last quarters at 1% growth each would not be enough to reach 1.4%.

The Minister of Finance Bruno Le Maire must already face a slippage of two billion euros in the State deficit at the end of 2023 and will have all the more difficulty, if growth is not there, to reduce the public deficit this year to 4.4% of GDP, before a hoped-for return to below 3% in 2027.

Particularly if current social demands, like those of farmers, result in additional spending.