Page 22 - economic report 2021

in imports (1.2% compared with 0.5%) and this meant that the contribution from foreign trade to
the trend in GDP was slightly positive (0.2 points).

As a result of the inertia in the recovery of In 2022, an increase in GDP of 2.4% is
the French economy at the end of 2021, the expected, much lower than the forecast
reference scenario for the Bank of France before
the outbreak of war in Ukraine was for GDP to before the outbreak of the war in Ukraine.
increase 3.9% in 2022. But, based on the new
conflict, the main international bodies revised their forecasts downwards. This summer, 2022, the
OECD and the European Commission forecast French GDP growth of 2.4% in 2022 and 1.4% in
2023 (the IMF, 2.3% and 1%), much lower than the forecasts published at the start of the year.
These downward revisions demonstrate the drawn-out impact of the high inflation rates and
supply problems. In fact, the consequences of the Ukraine conflict for French activity will be
especially notable from the second quarter of 2022. All the components of demand are expected
to be affected to different degrees: household consumption will slow due to the impact of energy
prices on purchasing power; increasing uncertainty about the future will discourage investment
and the negative impact on world trade will also hurt French exports.

High inf at on is forecast Although France’s direct exposure to energy
for 2022 and 2023. supplies from Russia is limited, bulk energy
prices have risen even more since the start of
the war. The spillover from high energy prices
to the rest of the consumer basket, with renewed pressure due to the impact of the European
embargo on Russian oil in 2023, the major workforce shortage and indexing of the minimum wage
will push up underlying inflation and wages over the next few months. The European Commission
20
forecasts published in July indicate that inflation will reach 5.9% in 2022 and 4.1% in 2023.

To respond to the current peaks in prices of basic products and energy, the French government
has temporarily limited gas and electricity tariffs, increased energy consumption coupons for the
poorest households and made a single additional means-tested transfer to 38 million individuals.
The Government has also temporarily cut fuel taxes, increased special conditional subsidies for
businesses and extended the state-guaranteed loans through the resilience plan. The direct
The external environment of the Andorran economy | II. The French economy
support measures have reached €27,000M (1.1% of GDP) and will be gradually removed at the
start of 2023. In July, faced with persistently high inflation rates, the French government approved
another package of €20,000M to protect people’s purchasing power, including measures such

Chart 2.4
THE CONSUMER PRICE TREND IN FRANCE - Interannual variation rates, as %

General inf at on Underlying inf at on

Source: Eurostat.