French central bank raises growth outlook as economy booms By Reuters

© Reuters. FILE PHOTO: Facade of the Banque de France headquarters in Paris, France, March 12, 2018. REUTERS/Charles Platiau/File Photo/File Photo

PARIS (Reuters) – France’s economy is recovering more quickly than expected this year as the COVID-19 crisis wanes, the central bank said on Monday, raising its growth outlook for this year.

The euro zone’s second-biggest economy is on course to grow 6.3% this year, the Bank of France said in its quarterly outlook, revising its estimate up from 5.8% expected previously in June.

The economy has outperformed most expectations in recent months after the country’s vaccination campaign picked up speed in the second quarter and coronavirus restrictions were eased, allowing most businesses to return to work.

The central bank’s revision makes its outlook a tad more optimistic than the government, which is building its 2022 budget on the assumption the economy will grow 6% this year.

The faster than expected bounce-back meant that as a result growth would be a bit lower next year because more of the recovery would be concentrated in 2021.

The central bank forecast the economy would grow 3.7% in 2022 and 1.9% in 2023, down from previous forecasts for 4.1% and 2.1% respectively.

Drawing on the findings of its monthly survey of 8,500 businesses, the central bank estimated the economy was operating at only half a percentage point from pre-crisis levels in September and would be back to normal levels by the end of the year for the first time since the pandemic broke out.

On a quarterly basis, it estimated the economy would grow close to 2.5% in the three months through the end of September, the central bank estimated. That would be more than double the 1.1% growth seen in the second quarter.

With the economy booming, half of companies were reporting staffing difficulties while more than half of industrial companies and 61% of construction firms were having supply-chain troubles.

Against that backdrop, inflation was expected to average 1.8% this year before easing back to 1.4% next year and 1.3% in 2023. Despite the strong rebound, unemployment was seen largely stable at 8.1%-8.2% between now and 2023.

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