Bank of France Lowers 2026 Growth Forecast to 0.4% Due to Weak Demand

The Bank of France has lowered its 2026 economic growth forecast to 0.4%, down from the 0.5% projection issued in June. Domestic demand is currently struggling because of high interest rates and geopolitical instability.

This revision matches the outlook from other French economic institutions. The French government and the national statistics office, INSEE, have adjusted their 2026 outlooks to 0.5% and 0.4% respectively, which reflects the central bank's cautious stance.

Inflation and Economic Headwinds

The Bank of France projects inflation will reach 2.3% in 2026. The central bank anticipates a decline in price pressures, forecasting inflation to reach 1.9% in 2027 and 1.6% in 2028.

Economic activity is constrained by the high-interest-rate environment and energy price volatility. The central bank identified the conflict in the Middle East as a source of uncertainty, noting its potential to disrupt global oil and gas markets.

Near-Term Economic Indicators

A monthly survey of 8,500 executives indicates that the French economy is on track to grow by 0.1% in the third quarter of 2026.

What Is at Stake for the French Economy

The alignment of forecasts between the Bank of France, the government, and INSEE highlights the challenges facing the eurozone's second-largest economy. As domestic demand softens, policymakers are balancing the management of inflation against the risks of stagnation. The reliance on energy imports and the sensitivity of industrial output to geopolitical shocks mean the French economy remains vulnerable to external developments, particularly those affecting energy costs.