The French economy suffers from rising inflation
The French economy, as well as a number of other EU countries, is in a very precarious position. The head of the Central Bank said that in 2023 the state may face a recession, which will cause a significant decline in the economy. However, even if these pessimistic forecasts come true, we should not expect such a drop in GDP, which the country faced in 2020. Back then, the pandemic caused a record decline for France.
According to analysts, next year the economy will grow by 1.4%, but it is possible that this forecast will be revised in the near future. The French government is due to present an updated draft law for the financial sector to the public one of these days. It contains controversial clauses, which may force experts to downgrade the economic growth forecast.
One of the main problems for the European Union remains the rapid increase in inflation. To slow it down, the European regulator announced an increase in the key interest rate – it will rise by 75 bp. In addition, the central bank said the rate will increase in the future. This decision sparked discontent in some countries. Thus, the finance ministers of France and Germany met to discuss the implications of higher interest rates and develop measures that would reduce the pressure on households. In addition, the issue of high gas prices, which have a negative impact on business development in the countries, remains acute. In this regard, the governments of France and Germany have developed measures to support local companies. According to them, business representatives will be allocated several billion euros, which will reduce the impact of rising inflation.However, this package of measures from the French and German politicians caused mixed reactions among experts. Some of them believe that such a move could on the contrary stimulate an increase in inflation, thereby introducing the economy into even greater difficulties.
As for the current situation in the French economy, consumer prices rose by nearly 6% last month in annual terms. At the same time, the rate of inflation has slowed down, which was caused by the weakening of energy prices on the world market. First of all, the growth slowdown was observed in prices for gas and oil products. The level of the core inflation amounted to 4.7%, and the dynamics of energy prices went down by almost 23%, though in the previous month it reached 28.5%. The cost of the market of services continued to increase – up to 4%. Foodstuffs showed an increase of 7.9%, and goods of the industrial sector – by 3.5%. Overall, according to the government, the economic situation in France is under control.