French economy rebounds, inflation will slow down next year – central bank


People visit a Christmas market in Mulhouse, France on December 15, 2021. REUTERS / Yves Herman

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PARIS, December 19 (Reuters) – French growth and inflation will moderate in 2022 after a faster-than-expected recovery this year, after which a tighter labor market will boost wages, the French central bank forecast on Sunday.

The eurozone’s second-largest economy is expected to grow 6.7% this year, the Banque de France said in its latest long-term outlook, raising its forecast to 6.3% earlier.

The momentum of the post-pandemic economy would weaken next year, with growth slowing to 3.6% and slowing again to 2.2% in 2023 and 1.4% in 2024, said the central bank.

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He also said inflation, driven largely by high energy prices, would peak at the end of this year at around 3.5% before falling back below 2% at the end of 2022.

After that, the central bank expects inflation to settle at 1.7% in 2023-2024, a rate that would be higher than the low inflation seen in the years before the COVID pandemic and closer to rates seen before the 2007-2008 financial crisis, the central bank told the bank.

As the current supply chain woes have eased, prices for manufactured goods peaked next year before returning to their near zero long-term average.

Meanwhile, prices for services would gradually increase, reaching 2.7% in 2024, as a tighter labor market increased workers’ wages, depicting an inflation scenario similar to that seen between 2002 and 2007, a indicated the central bank.

He predicted that unemployment would drop from 7.8% on average this year to 7.7% by the end of 2024. Meanwhile, wage gains in the private sector would reach 4% next year before falling back to 3% thereafter, which would be even higher than the levels observed in the decade preceding the pandemic.

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Reporting by Leigh Thomas Editing by Raissa Kasolowsky

Our Standards: Thomson Reuters Trust Principles.


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