January 27, 2023


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Growth: the end of the year will be better than expected, according to the Banque de France

Posted 8 Dec. 2022 at 20:00

Despite the difficult times, the French economy is holding up and the end of the year is looking better than expected. According to the Banque de France, activity grew faster than expected in all sectors in November. Based on the survey of 8,500 business leaders, it expects in December “a further increase in services and a stability of activity in industry”. Only the building would record a decline.

In this context, growth would not be zero in the last quarter as expected in September. GDP is expected to increase by 0.1%, confirming its forecast of a 2.6% increase in economic activity in France in 2022.

Fewer supply difficulties

Other good news, the institution notes that the supply difficulties continue to be resolved. Moreover, when asked about the impact of the energy crisis, only a quarter of companies fear a shock to activity, as in October. On the other hand, the share of managers expecting a significant impact on their margins over the next three months increases by three points (52% to 55%). The concern is palpable in industry where 70% of business leaders express this fear (+ 4 points) and in construction (66%).

In his speech delivered this Thursday before the Toulouse School of Economics, the Governor of the Banque de France, François Villeroy de Galhau, quantified the cost for the French economy of the surge in the price of imported oil and gas: “The calculation results in an additional energy bill equal to 1.9% of GDP in 2022 compared to the previous year, or 47 billion euros,” he said. This estimate does not include electricity, the price and supply shock being “more difficult to assess”. The margin rate of companies should reach its lowest point in 2023, he warned.

The budgetary measures have made it possible to modify the distribution of the levy between the various economic agents. By only retaining the support measures targeting the oil and gas bill, the central bank estimates that households have borne 6% of the drain, public administrations 35% and businesses 57%.

A photo quite different from that delivered this week by the Directorate General of the Treasury, which favored an “extensive” approach integrating purchasing power support measures or the tariff shield on electricity. According to his calculations, the State would thus assume 52% of the energy shock, companies 42%. On the other hand, the conclusion would be the same for households.

Reduce the share of public finance

The Banque de France and the Directorate General of the Treasury nevertheless agree in their recommendations. “It is necessary that the government measures be as temporary as possible,” urged François Villeroy de Galhau in his speech. Clearly, “the part supported by public finances must decrease after the peak of the shock”.

The governor sets a deadline for the end of aid: “government measures should return to zero in the next two or three years”, he asserts.

François Villeroy de Galhau does not rule out that companies must bear more of the weight of the energy shock. But the question of the distribution between those operating in the energy sector and the others – in particular those most dependent on energy – will have to be asked. As for households, they “cannot be totally and definitively exempted from their share in the distribution”. In other words, they will have to pay more.

For the governor, the measures adopted must in any case “not run counter to the incentives to reduce our energy consumption”. According to him, Germany and the Netherlands are “going in the right direction by preserving the price signal on marginal consumption”.