English
العربية
Français
Deutsch
Español
русский
हिंदी
اردو
LoginFrench Government Cuts 2026 Growth Forecast to 0.5 Percent
Paris, September 11 (QNA) - France is facing mounting economic and financial pressures as growth prospects weaken and borrowing costs rise, while the government confronts the need to take difficult measures to reduce the budget deficit and secure financial resources.
French Economy Minister Roland Lescure announced today that the government has lowered its forecast for economic growth in 2026 to 0.5 percent, from 0.7 percent previously, while projecting growth of 1 percent in 2027.
Speaking at a press conference held to update the government's macroeconomic outlook, Lescure said inflation is expected to reach 2.1 percent this year before easing to 1.8 percent in 2027.
He also acknowledged that the government's target of reducing the budget deficit to 5 percent of gross domestic product (GDP) this year is no longer achievable, stressing that the deficit will exceed that level. He said the limited fiscal room for maneuver makes it necessary to adopt the 2027 budget before the end of the year.
The latest revision marks the third time France has cut its growth forecast for 2026. The government lowered its projection from 1 percent to 0.9 percent in April, then to 0.7 percent in June, before cutting it to 0.5 percent today - effectively halving its initial forecast for the year.
France's National Institute of Statistics and Economic Studies (INSEE) has also lowered its 2026 growth forecast to 0.4 percent, from 0.7 percent previously, warning that the French economy is likely to underperform relative to its European neighbors.
Meanwhile, Bank of France Governor Francois Villeroy de Galhau said that proposals to cancel part of France's debt would be illegal, dangerous and ineffective, and would run counter to European treaties. He warned that such a move could fuel inflation and push interest rates higher without helping to reduce the budget deficit.
Villeroy de Galhau cautioned that debt cancellation could ultimately lead to France leaving the eurozone and make it more difficult for the country to borrow from financial markets. He said that canceling 500 billion euros of government debt would neither provide additional fiscal room nor reduce the deficit, as it would, in his assessment, create a corresponding shortfall on the balance sheet of the Bank of France.
Bond markets are reflecting growing pressure on France's public finances. The yield on France's 10-year government bonds stood at around 4.44 percent on Thursday, its highest level since 2008, compared with 3.50 percent for equivalent German bonds. The spread between the two yields widened to around 0.94 percentage points, the largest gap since 2012. Yields were broadly stable today at 4.43 percent in France and 3.50 percent in Germany. (QNA)
chat
Hello! How can we help?
Beta
