Under threat of unemployment. 2023-2024 Outlook for the French economy

In 2023, with inflation still high (+5.2% in 2023, as in 2022) and a context marked by a sharp rise in key ECB interest rates, France's GDP will grow by 0.9%. 2024 should see falling inflation (3.3% annual average and 2.3% year-on-year at year-end), but growth will remain modest (0.8%) as hikes in the key interest rates take full effect. In our assessment, the impact of monetary policy will reduce GDP growth by -0.9 point in 2024 (after -0.4 point in 2023). The unemployment curve is likely to turn upwards in the second half of 2023, and above all in 2024, with unemployment rising from 7.2% at present to 7.9% by the end of next year, against a backdrop of marked increases in the working population due to the implementation of pension reform. Weak growth in activity and a partial recovery of past productivity losses would account for the strong momentum in employment seen in recent years (-53,000 year-on-year in 2024, after +140,000 in 2023 and +509,000 in 2022). In contrast to 2022 and 2023, real wages should increase (+0.6 %) in 2024, limiting the negative impact of job losses (-0.1%) on the wage bill. In 2024, real wages (deflated by the CPI) should return to their 2019 level. After a contraction in purchasing power per consumption unit (CU) in 2022 (-0.4%, following +2.1% in 2021), households will once again see their real income rise in 2023 and 2024 (+0.7% and +0.4 % per CU respectively), driven again this year by job creation, wealth taxes and fiscal support, and next year by rising real wages. Despite the curtailing of exceptional budgetary measures, the public deficit will remain at 4.8% of GDP in 2023 and 2024, mainly due to sluggish growth, which will hit tax revenues.