French GDP growth lowered to 0.4 percent amid energy shock
The Banque de France has revised down its 2026 French GDP growth forecast by 0.1 percentage point to 0.4 percent. The September interim projections attribute the sluggish activity to weak domestic demand and geopolitical tensions in the Middle East.
Slower expansion and sticky energy pressures
Economic growth in France is set to slow to 0.4 percent in 2026 following flat activity in the second quarter, before rebounding to 0.9 percent in 2027 and 1.2 percent in 2028.
Headline inflation is projected to average 2.3 percent in 2026, driven by higher energy prices linked to Middle East tensions, before easing to 1.9 percent in 2027 and 1.6 percent in 2028.
Core inflation will remain at 1.6 percent this year, rising to 2.3 percent in 2027 due to delayed energy pass-through and wage increases.
The purchasing power of wages drops by 0.7 percent in 2026 as wages rise 2.0 percent, while the unemployment rate climbs to 8.4 percent by year-end, averaging 8.3 percent through 2027.
Middle East conflict dictates outer bounds
The baseline outlook assumes falling oil prices over the horizon, while gas prices rise ahead of winter before retreating in mid-2027.
Private investment remains constrained by tighter financing conditions and fiscal uncertainty.
Alongside the baseline, the central bank modeled three Middle East conflict trajectories.
Under a severe scenario featuring gas prices peaking at €130 per megawatt-hour and oil at $132 per barrel, French GDP contracts by 0.2 percent in 2027 while headline inflation reaches 4.2 percent.
A fragile pause before delayed recovery
The projections confirm that France faces a painful real-income squeeze that leaves household demand fragile.
Relying on an export rebound to offset domestic weakness remains an optimistic assumption given global trade fragmentation.
Any escalation in energy markets risks tipping this near-stagnation into outright contraction.