Olympics to Boost French ⁣Growth in Third Quarter

The Olympics are ⁢expected to boost French growth in the third ‌quarter, with a forecast of around 0.4%, according to the Banque de France. However, risks related to ⁣political uncertainty⁣ are weighing ⁢on economic activity.

The central bank expects a ⁤significant ​increase‌ in gross domestic product (GDP) between July and September, confirming ​a first estimate published in early ⁢August. Banque de France chief economist Olivier Garnier stated that‍ the mid-range forecast is around 0.4%.

After growth‌ of 0.2% in the second quarter, GDP would record an increase of 0.1% to 0.2%⁤ excluding the Olympics. The temporary effect ⁣of ‌the Olympic Games, held in​ Paris between July 26 and August 11,⁣ and⁣ the Paralympic ⁣Games between August 28 and September 11, would add around 0.25%⁣ to the growth.

Uncertainty Weighs⁣ on‌ Economic Activity

However, this forecast is surrounded by dangers, including the possible ⁣side effects of the Olympic Games and political uncertainty as ⁣a result of early legislative⁢ elections. An⁣ increase⁣ in uncertainty‌ has a‌ negative impact on activity,⁤ creating wait-and-see behavior among‍ businesses.

This wait-and-see attitude remains in place as new Prime⁢ Minister Michel Barnier‍ forms a government, more than two months after the election. Time is running out to present the draft budget for‍ 2025, which is due​ to‌ be​ presented in the Senedd on October 1 ‍at the latest.

Challenges⁣ Ahead

The task promises to be complex, with ⁢public deficit forecasts for​ this year (5.1% of⁣ GDP) ‍and 2025 (4.1%) threatened with ⁢slippage, according to⁣ the Treasury. The⁢ National⁢ Institute of Statistics (Insee) lowered its GDP growth forecast for the third quarter from⁢ 0.5% to 0.4% on⁤ Monday.

The following⁢ months could be even more difficult, with GDP expected to contract by 0.1% in‌ the⁤ last quarter ‍of the year. However, ‍the statistical ⁣institute​ kept its forecast for 2024 unchanged ‍at 1.1%.

Business Activity and Outlook

For ‍the month of August alone,⁢ the approximately ⁣8,500 companies surveyed by the Banque de‌ France reported an increase in ⁣activity, moderate in industry and stronger in services thanks ⁤to the Olympic Games‌ and better weather.

The increase ​expected for September is lighter, with ⁣possibly a “backlash”⁣ in services. ⁤In industry, order books are seen as declining,‍ with only aeronautics⁤ doing well. Supply difficulties are relatively low, except‍ in‍ the car and aeronautics industries.