The French Observatory of Economic Conditions published, Tuesday October 17, its forecasts for 2024 which are significantly less optimistic than those of the government. With activity slowing down, the objective of full employment is moving away.
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Is the government being too optimistic in its forecasts? The French Observatory of Economic Conditions (OFCE) is counting on a clear slowdown in activity next year with growth which would painfully reach 0.8% of gross domestic product (GDP). While the Ministry of the Economy is banking on 1.4% growth.
According to the OFCE, this drop in activity, combined with the end of “whatever it takes”, and the repayment of loans guaranteed by the State – widely used during Covid – will lead to an increase in bankruptcies and job destruction. And if more businesses go out of business, unemployment will rise again at the end of the year. At the end of 2024, the unemployment rate would reach 8%, compared to 7% today. The government, for its part, continues to boast of its record in this area, and always intends to achieve full employment. That is to say 5% unemployment at the end of the five-year term. Which therefore seems, according to these experts, a little ambitious.
On the inflation side, This is rather the good news, the rise in prices should slow down in 2024: around 3.3% on average, or two points less than this year. If inflation is falling, it is because the surge in energy prices will calm down. But also because interest rates will remain high next year, because central banks will continue their monetary policy which consists of making money more expensive. Enough to complicate access to credit, for businesses and individuals alike.
Forecasts that do not yet take into account the effects of the conflict in Israel
The international economic context is uncertain and this is a bit of a blind spot in these forecasts which have not yet integrated the effects of what is happening in Israel. Thus, the OFCE does not rule out repercussions of the conflict on energy prices – it could increase oil prices. This conflict, if it spreads, can also affect the activity. The risk of attacks can encourage people to travel less, go out less, consume less, etc. It is often said that the economy also has a lot to do with trust. This succession of dramas and geopolitical tensions is not reassuring.