French central bank expects zero growth in fourth quarter

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There is an increasing uncertainty for the near future among French businesses coupled with a slight increase in activity in November, according to the Bank of France’s monthly economic survey, which offers an insight into the current business climate in the country.

France is currently grappling with a political crisis, as Michel Barnier’s government collapsed following a no-confidence vote, only three months after it took office.

As a result, France is facing 2025 without a valid budget and this will remain the case until President Macron names a new Prime Minister to form a new government.

The Bank of France’s survey, which was carried out before the government collapsed, shows a high level of uncertainty among businesses.

In the industry and construction sectors, business uncertainty has reached its highest level since the energy crisis of 2022.

“The uncertainty indicator based on company comments remains relatively high in all sectors, with responses highlighting the domestic political situation and the impact of tax debates, as well as the international environment,” read the report.

Nevertheless, the Bank of France expects a slight positive growth in activity for the last three months of the year.

“We estimate that the country’s underlying activity,” excluding the exceptional effect of the Games, “would maintain its slightly positive growth trend in the fourth quarter,” said the bank in the report.

They estimated that this activity, approximately 0.2 points of GDP, would be offset by the backlash from the effect of the Paris Olympic and Paralympic Games, which are estimated at -0.2 points.

Therefore the bank is maintaining its growth forecast, expecting no growth in the last three months of the year, compared to the previous quarter when the GDP grew by 0.4%, mainly driven by the effects of the Paris Olympics.