It comes after France’s national statistics office lowered its forecast for 2026 growth from 0.7% to 0.4% and warned that the French economy was “losing ground.”
France’s government has cut its forecast for economic growth in 2026 from 0.7% to 0.5%, as weak activity in the first half of the year weighs on the outlook.
Economy Minister Roland Lescure announced the downgrade on Friday after the French economy contracted by 0.2% in the first quarter and stagnated in the second, putting the nation increasingly at odds with some of its main European neighbours.
Germany, Italy, Spain, and the UK all recorded growth during the first two quarters of the year. Germany posted growth of 0.4% and 0.3%, Italy 0.3% and 0.2%, Spain 0.6% and 0.7%, and the UK 0.6% and 0.4%.
The new forecasts come a day after even more pessimistic projections from INSEE, the French statistics office. It lowered its forecast for 2026 growth from 0.7% to 0.4%, warning that the French economy was “losing ground.”
Lescure nevertheless forecast growth of 1% in 2027. He added that he expected inflation to reach 2.1% in 2026 and 1.8% next year.
The downward revision makes the government’s budget equation more complicated. Weaker growth is likely to weigh more heavily on public finances, even though the government had set itself the goal of bringing the deficit down to 5% of GDP in 2026, from 5.1% in 2025. French Prime Minister Sébastien Lecornu had already admitted he was not “very optimistic” about hitting that target.
French economy ‘stalled’
According to INSEE, “all the engines of domestic demand” are “stalled.”
Household consumption remains weak and investment is falling, hit by a slowdown in public projects linked to the municipal electoral cycle.
The institute also highlights the impact of heatwaves, which are particularly severe for agriculture. For its part, the government estimates that, if nothing is done, climate change could shave 3.6% off French GDP by 2050.
INSEE also reports that the labour market is “more degraded than elsewhere in Europe,” with rising unemployment and sluggish wage growth.
Deteriorating public finances are also limiting budgetary support for the economy.
Activity is nonetheless expected to pick up slightly in the second half of the year. INSEE is forecasting growth of 0.1% in the third quarter and 0.2% in the fourth. For the year as a whole, however, the expansion of the French economy would remain roughly three times weaker than that of its neighbours in the eurozone and the UK.
Rising inflation, falling purchasing power
Another piece of bad news for households is that inflation is expected to keep rising, reaching 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, due in particular to the decline in paid employment and rising prices.
“A large share of households” is likely to be affected
Household consumption, traditionally a key driver of the French economy, would therefore grow by only 0.3% in 2026. Households are also expected to dip further into their savings, with the savings rate falling from 17.8% of gross income in 2025 to 17.3% this year.
Business investment, for its part, would fall by 0.3%, while household investment would drop by 1.3%.
INSEE nevertheless stresses that “some uncertainties remain,” notably regarding the impact of heatwaves on activity in the third quarter and developments in the situation in the Middle East.
Source: www.euronews.com
