Banque de France revises growth and inflation outlook amid geopolitical uncertainty
The Banque de France published its March 2026 macroeconomic projections for France. The central bank revised down its GDP growth forecast for 2026 to 0.9 percent, citing the impact of the Middle East conflict and rising energy prices.
Geopolitical headwinds temper growth outlook
In its baseline scenario, the Banque de France projects GDP growth for France at 0.9 percent in 2026, a slight downward revision from its December forecasts.
Economic activity proved more resilient than expected at the end of 2025 and in the first quarter of 2026.
However, the rise in energy prices and the deteriorating geopolitical context are expected to weigh on the French economy.
GDP growth is forecast at 0.8 percent in 2027, before picking up to 1.2 percent in 2028, driven by a rebound in exports and private domestic demand.
Inflation is expected to rise to 1.7 percent in 2026, primarily due to energy prices, then temporarily fall to 1.4 percent in 2027, before rising again to 1.6 percent in 2028, largely influenced by services inflation.
The purchasing power of wages is expected to remain stable in 2026, then increase in 2027 and 2028.
Three scenarios, varying energy shocks
The projections incorporate considerable uncertainty following the outbreak of the Middle East conflict, leading to the presentation of several scenarios consistent with those of the Eurosystem.
The baseline assumes a temporary surge in hydrocarbon prices, corresponding to a swift resolution.
Two more adverse scenarios are presented, featuring stronger and more lasting rises in hydrocarbon prices.
Under the first adverse scenario, oil and gas prices would reach USD 119 per barrel and EUR 87 per MWh, respectively, in the second quarter of 2026.
The severe scenario projects prices reaching USD 145 per barrel and EUR 106 per MWh in the same period, remaining higher long-term.
Under the severe scenario, HICP inflation would reach 3.3 percent in 2026, with weaker but still positive annual GDP growth.
Uncertainty dictates the narrative
These projections underscore the profound impact of geopolitical events on economic forecasts, forcing a multi-scenario approach.
While the baseline offers a tempered outlook, the adverse scenarios highlight significant downside risks, particularly for inflation.
This cautious stance reflects a realistic appraisal of current global instability, making policy responses more complex.
Source: Macroeconomic interim projections – March 2026
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