20:10: French economy punished by war in Ukraine
According to two scenarios presented on Sunday by the Bank of France, French economic growth should contract by 0.5 to 1.1 percentage points in 2022 due to the war in Ukraine. France’s gross domestic product (GDP) will increase by 3.4% in 2022 if the price of oil averages $93 for the year, and only by 2.8% if this price reaches $119, the central bank said, which indicated that without the war, he would have raised his growth forecast from 3.6% to 3.9%. For 2023 and 2024, the Bank of France forecasts that growth, which again benefits from strong YTD growth this year, will fall to 2%, then to 1.4% in the first scenario, qualifying as “traditional” and in 1. 3%, then 1.1% in the second is called “degraded”.
The consequences of the war will also affect the agreed consumer price index (HICP), which should be 3.7% this year under the first scenario and 4.4% under the second. This inflation measure, which allows comparisons at the European level and takes into account energy prices to a greater extent than the national consumer price index (CPI) proposed by INSEE, rose to 4.1% y/y in France in February, but according to the Bank’s models France before the war, it should return to around 2% by the end of 2022.
The negative shocks of the conflict for the French economy also come in three types: higher energy and raw material prices, reduced consumption and investment, and reduced demand for France, which will affect foreign trade, the Bank of France further indicates.