Bad news for the economy: the Bank of France significantly lowered its growth forecast for 2026 on Tuesday June 16, now expecting zero growth in the second quarter, after the unexpected decline in gross domestic product (GDP) over the first three months of the year.
In its macroeconomic projections published on Tuesday, the French central bank now expects GDP growth of 0.5% for the year 2026, significantly less than the 0.9% it forecast in March.
It is also much more pessimistic than the government’s expectations, which at this stage is counting on + 0.9% this year. The International Monetary Fund (IMF), for its part, lowered its growth forecast for France in 2026 from 0.9% to 0.7% in May.
“The price of oil has increased more than assumed in the March base case. But above all, activity proved less resilient than anticipated in the first quarter of 2026″, with a decline of 0.1% of GDP, “and should remain relatively sluggish in the second quarter”, explained the Banque de France.
She emphasizes, however, that these projections were “made in a particularly uncertain international environment” and without “taking into account the announcement of June 14 relating to the possible signing of a framework agreement between States? United and Iran.”
These “half-hearted” forecasts do not take into account “the announcements of a ceasefire and reopening of the Strait of Hormuz” in the Middle East, reacted the Ministry of the Economy, which wants to see it as a “signal of revival of the French economy”
“The time has come for the return of collective confidence: it is this, more than public spending, which will sustainably support growth,” according to Minister Roland Lescure.
“Rebound” in 2027 and 2028
The Banque de France also significantly raised its inflation forecast for the year 2026. HICP inflation (Harmonized Consumer Price Index, which allows comparisons between the different inflations in the euro zone) would rise to 2.5%, compared to 1.7% in the March forecasts, “driven by the rise in energy prices and its indirect effects”.
In its central scenario, the bank expects a “rebound” in growth in 2027 to 0.9% (compared to 0.8% forecast in March) and 1.2% in 2028 (as previously). It would be “supported by the recovery in private domestic demand, in particular household consumption and business investment”.
Inflation would fall in 2027 and 2028 to 1.7%, due to the easing of energy prices (compared to respectively 1.4% in 2027 and 1.6% in 2028 forecast in March). For its part, the European Central Bank (ECB) adjusted its forecasts on Thursday, now forecasting overall inflation of 3% in the euro zone in 2026 and growth of 0.8%, with alternative scenarios.
The Banque de France is also considering three scenarios, in addition to the basic one providing for a transitory surge in hydrocarbon prices based on assumptions made as of May 21. One, more favorable, would be based on a faster and more marked drop in hydrocarbon prices, and two more unfavorable ones on more pessimistic market expectations.
Deterioration of the deficit
In the most unfavorable scenario, inflation would reach 4% in 2026 and 3.9% in 2027 before normalizing in 2028. GDP would stagnate in 2026 and 2027, before rebounding in 2028.
The Banque de France also publishes its monthly economic survey for May on Tuesday, conducted among 8,500 business leaders: it shows a clear slowdown in activity in industry and a decline in services and construction. On the other hand, business leaders anticipate better activity in June.
In its projections, the central bank is not very optimistic for French public finances: the public deficit “could deteriorate slightly in 2026”. After standing at 5.1% in 2025, it would be 5.2% of GDP “in the absence of additional savings measures”.
The recovery of the deficit could then be “limited” in the years to come, “not allowing a stabilization of the debt ratio”, which would increase to reach 122% of GDP in 2028.
