Global Economic Outlook – September 2022 France: A costly shield from inflation Robust growth in 2022 H1 Inflation to peak at a lower Unemployment is set to conceals vulnerabilities level compared to its increase from current levels facing households and Eurozone peers thanks to the owing to a deterioration in businesses. EUR72 billion tariff shield. the economic outlook. After falling by 0.2% in 2022 Q1, the French economy Table 11: KPMG forecasts for France registered solid growth of 0.5% in the second quarter of 2021 2022 2023 2022. The composition of growth was broad-based, with household consumption, investment and net trade all GDP 6.8 2.5 0.6 contributing positively. The rebound was partly driven by a Inflation 2.1 5.9 3.9 seasonal boost from tourism following the easing of Covid restrictions in March. GDP is now 0.9% above its pre-Covid Unemployment rate 7. 9 7. 5 7. 7 level, although the majority of the increase (0.8 percentage Source: Eurostat, KPMG forecasts. points) can be accounted for by stronger government Note: Average % change on previous calendar year except for unemployment rate, consumption. which is average annual rate. Inflation measure used is the HICP. Business and consumer surveys paint a gloomier picture for the near-term outlook. Consumer confidence is hovering close to its lowest levels since records began, while PMI Chart 34: Outlook for the French economy surveys suggest subdued business confidence across all of the three main sector groups. While the shortage of labor 8 Forecast and materials has reached its highest level for at least 30 6 years – limiting capacity – concerns around the outlook for demand are likely to weigh on production going forward. 4 2 We have revised down our forecast for GDP growth for this 0 year and next. Despite robust performance so far this year, uncertainty around a weakening domestic demand, coupled -2 with a deteriorating external environment, will likely see a -4 significant slowdown in the latter part of this year and into 2023. We now expect GDP growth of 2.5% in 2022 and -6 0.6% in 2023. Contributions to annual GDP growth, percentage points-8 2015 2016 2017 2018 2019 2020 2021 2022 2023 Consumption Government Investment Net trade Other (inc. stocks) GDP Source: Eurostat, KPMG analysis. © 2022 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. 35