PARIS, Sept 9 (Askume) – France’s economy grew rapidly in the third quarter thanks to the Olympics but could slow down before the end of the year, France’s national statistics office forecast on Monday.
An influx of tourists attending the Paris Olympics has boosted consumer spending in the euro zone’s second-largest economy and given businesses a reprieve from the political dispute that led to a parliamentary deadlock in July.
In its latest economic forecast, the INSEE said the economy would grow by 0.4% in the third quarter, after rising by 0.2% in the first three months. Its forecast was revised downwards from 0.5% previously.
The INSEE said it expected the Olympics to generate 0.3% growth, mainly driven by ticket sales, television rights and tourists’ cash spending at hotels and restaurants.
The INSEE said the French economy shrank by 0.1% in the final quarter of the year as the effects wore off, resulting in France’s full-year growth rate of 1.1%, keeping its forecast unchanged.
INSEE’s 2024 forecast is in line with government forecasts, with Finance Minister Bruno Le Maire saying in the summer that the Olympics could result in economic growth slightly above the official forecast of 1%.
After weeks of trying to find a new prime minister, French President Emmanuel Macron on Friday named conservative political veteran Michel Barnier, who will now work to form a cabinet and draft a common plan, triggering a 2025 budget election that is sure to be difficult amid deep divisions.
With the political crisis showing no signs of easing, businesses are still likely to face uncertainty and investment plans are likely to be delayed due to high interest rates, INSEE said.
The prospects for French exporters have become bleak due to the weak economy of Germany, France’s biggest trading partner, INSEE said.
However, low inflation will continue to boost household purchasing power, helping to ease some of the pressure on consumer spending after the Olympics.
The INSEE forecasts that inflation will remain below 2% for the rest of the year, reaching 1.6% by December.
