Insee has sharply cut its 2026 growth forecast, from 0.7% to 0.4%. After a subdued first half, weak consumption, falling investment and rising inflation darken the outlook for year-end.
While the economies of its main European neighbours continue to grow, France is standing out as an exception. After a start to the year marked by a 0.2% fall in GDP in the first quarter, followed by flat activity in the second, the French economy is “losing ground”, Insee warns. The statistics office, which had until now been forecasting 0.7% GDP growth, has sharply revised down its growth outlook for 2026, now capped at 0.4%.
The situation contrasts with that of the main neighbouring economies. Over the first two quarters, Germany recorded growth of 0.4% and then 0.3%, Italy 0.3% and then 0.2%, and Spain 0.6% and then 0.7%. The United Kingdom, for its part, grew by 0.6% and then 0.4%.
The engines of the French economy “stalled”
According to Insee, “all the engines of domestic demand” are “stalled”. Household consumption remains weak and investment is falling, weighed down by a slowdown in public projects linked to the municipal electoral cycle.
The institute also points to the impact of heatwaves, particularly severe for agriculture, as well as a labour market “in a worse state than elsewhere in Europe”, marked by rising unemployment and sluggish wages.
The deterioration in the public finances is also limiting budgetary support for the economy.
Activity should, however, pick up slightly in the second half of the year. Insee is forecasting growth of 0.1% in the third quarter and then 0.2% in the fourth. For the year as a whole, the expansion of the French economy would nonetheless remain roughly three times weaker than that of its neighbours in the eurozone and the United Kingdom.
Inflation rising, purchasing power falling
Another piece of bad news for households: inflation is expected to continue climbing and reach 2.9% at the end of the year, compared with 2.4% in August.
In this context, purchasing power is set to fall by 0.4% over the year as a whole, notably as a result of lower paid employment and higher prices. “A large share of households” is likely to be affected
Consumption, traditionally the engine of the French economy, would thus grow by only 0.3% in 2026. Households are also expected to draw more heavily on their savings, with the savings rate falling from 17.8% of gross income in 2025 to 17.3% this year.
Business investment would fall by 0.3%, while household investment would shrink by 1.3%.
Insee nonetheless stresses that “some uncertainties remain”, notably regarding the impact of heatwaves on activity in the third quarter and how the situation in the Middle East develops.
The deficit target under strain
This downward revision also complicates the government’s budget equation. Just two months ago, the executive had already cut its growth forecast for 2026 from 0.9% to 0.7%.
Weaker growth risks weighing more heavily on the public finances, even though the government had set itself the goal of bringing the deficit down to 5% of GDP in 2026, compared with 5.1% in 2025. Prime Minister Sébastien Lecornu had already admitted that he was not “very optimistic” about hitting that target.
The government is due to unveil its new economic forecasts on Friday, a few weeks before the presentation of the 2027 budget.
Source: <a href="https://www.euronews.com/business/2026/09/11/growth-france-lags-behind-its-european-neighbours” target=”_blank” rel=”nofollow noopener”>www.euronews.com
