The Bank of France predicts that the French economy will experience a sharp slowdown this winter, from which it will only gradually recover, casting further doubt on President Emmanuel Macron's government's economic optimism.

Weaker demand for French exports, higher inflation, and higher interest rates than previously anticipated mean the central bank expects growth to slow down to 0.3% in 2023, well below the 1% target set by the Finance Ministry. It stated that a recession cannot be ruled out, even if it would be brief and limited.

“After showing good resilience during most of 2022, activity will go through two distinct phases: a sharp slowdown from this winter, followed by an easing of inflation tensions and a gradual recovery of economic growth in 2024 and 2025,” the Bank of France said. 

The outlook comes after the national statistics agency Insee determined that a sharp acceleration would be required during the second half of 2023 to achieve the 1% growth needed by the government to meet its budget deficit goal.

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In response to the report, French Finance Ministry officials said Thursday that the government is sticking to its 1% forecast because the economy is resisting pressure from rising energy prices and will rebound next year.

The Bank of France stated that there is a high degree of uncertainty surrounding its forecast, particularly regarding the natural gas supply in Europe. The final outcome for 2023 could be between a 0.3% contraction and a 0.8% expansion, according to the report.

Inflation will peak at 7.3% at the end of 2022 before falling to around 4% in the fourth quarter of 2023, according to the forecasts, despite government-financed energy price caps. Even though energy costs are expected to ease in 2024, the Bank of France expects inflation in the services sector to remain stable as wages and rents adjust.

Earlier this month, Macron called statements made by public authorities and media reports regarding the power outage in the country during the winter "absurd" that are "scaring" citizens of the country.

"These debates are absurd. The role of state authorities and organizations is not to create fear and be driven by this fear. Their role is to do their job to provide people with electricity," said Macron, adding that "this goes for everyone's responsibility — and it lies in 'energy sobriety,' and not in scaring people with absurd scenarios. Stop all of that."