French central bank raises 2023 growth outlook, trims 2024 and 2025

FILE PHOTO: Paris tourism

PARIS (Reuters) - France's economy will grow slightly less than expected in the next two years due to weakness in its main trade partners, the central bank said on Monday, but it raised its 2023 forecast after a surprisingly strong second quarter.

The euro zone's second-biggest economy is set to grow 0.9% this year, the Bank of France forecast in its quarterly economic outlook, revised up from 0.7% in June.

The improved outlook was due mainly to better-than-expected second-quarter growth of 0.5%, a figure that was boosted by refineries restarting after strikes, nuclear power output coming back on line after maintenance and the delivery of an oceanliner.

Next year, growth is forecast at 0.9% again, trimmed from 1.0% in June, before picking up to 1.3% in 2025, weaker than the 1.5% forecast by the central bank in June.

Although consumer spending is expected to improve in the coming two years as inflation subsidies, a weak outlook for the German economy - France's main trade partner - and sluggish growth in China were expected to limit gains, the central bank said.

After peaking in February at 7.3%, France's central bank forecast inflation would decline to average 5.8% this year, 2.6% next year and 1.8% in 2025 - just below the European Central Bank's 2% target.

Lower inflation was expected to translate into higher real wages and possibly spur households to set less aside after a jump in the savings rate to nearly 19% in the second quarter.

France's central bank said employment would remain strong this year although a lag between the labour market and the broader economy meant that more jobs would be shed than created from next year.

It estimated the unemployment rate would rise from 7.2% this year to 7.5% in 2024 and 7.8% in 2025.

(Reporting by Leigh Thomas; Editing by Christina Fincher)