Energy price shocks emerge; French central bank lowers growth forecast and raises inflation estimate

After incorporating the impact of the energy price surge triggered by the Iran war, the French central bank lowered its economic growth forecast for 2026 and raised its inflation estimate.

The updated outlook continues the European Central Bank’s similar adjustments and also covers adverse and severe scenarios.

However, the French central bank’s projections indicate that inflationary pressures are less severe than those of the European Central Bank, and even under severe scenarios, the expected increase in consumer prices next year will not exceed 2%.

As the second-largest economy in the eurozone, France’s inflation level has remained below the regional average for several months. Because it relies more on nuclear energy, France’s dependence on oil is also lower than that of other countries in the region.

In terms of economic growth, the French central bank’s adverse scenario shows that the drag on growth this year is more pronounced, but starting in 2027 it aligns with the baseline forecast. The severe scenario indicates that growth will decline more sharply this year and next year.

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Responsible editor: Ding Wenwu