France cuts growth forecast again as economic uncertainty weighs heavy

The government now expects growth of 0.5 percent in 2026, down from 0.7 percent previously. 

"This year has been marked by extreme crises involving four different types of shocks," Lescure said on Friday. He cited domestic political uncertainty, surging energy prices, extreme summer weather and a jump in borrowing costs on bond markets. 

Lescure nonetheless said France was sticking to its forecast of 1 percent growth next year. 

The downgraded outlook will make it harder for the government to get its 2027 budget passed in the coming months. A deeply divided parliament is due to begin examining it at the end of the month. 

Deficit target out of reach 

The government had aimed to bring the deficit down to 5 percent of GDP in 2026, from 5.1 percent last year, although Prime Minister Sébastien Lecornu had already admitted he was not "very optimistic" about reaching the target. 

"The reality is that the budget was built on a 5 percent assumption. And the reality is that, today, 5 percent is no longer an option," Lescure said. 

The new forecasts come a day after the national statistics office, Insee, cut its forecast for 2026 growth from 0.7 percent to 0.4 percent, warning that "all the engines of domestic demand" were "stalled". 

It also pointed to a French labour market that was "more degraded than elsewhere in Europe", with rising unemployment and sluggish wage growth. 

While economic activity is expected to pick up slightly later this year, Insee said growth would remain roughly three times weaker in France than in its Eurozone neighbours and the United Kingdom. 

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Fall in purchasing power 

Inflation, meanwhile, is expected to keep rising, reaching 2.9 percent at the end of the year compared with 2.4 percent in August. 

Insee said this would lead to a 0.4 percent fall in purchasing power over the year as a whole, likely affecting "a large share of households". 

A report published on Thursday by the French charity Secours Populaire found that an increasing number of people were struggling to make ends meet, with petrol prices up by more than a third over the last six months. 

The survey found that 26 percent of French people said they were in a precarious situation, up 6 percentage points in a year. 

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'No more fat to trim' 

The economic fallout from the war in the Middle East, along with summer heatwaves and drought that hit agricultural output, have dragged down growth and put the government's fiscal targets out of reach. 

"I think it is reasonable to say that economic uncertainty has never been greater than it is today," Lescure said. "We are operating under tight budgetary constraints; there is no more fat to trim." 

French borrowing rates have surged in recent weeks as investors react to what is seen as France's weak public finances and slippage on its deficit-reduction plans. 

France will spend €65 billion servicing its debt this year, making it the single biggest expense in the budget and €4.5 billion more than initially planned, Lescure said. 

France's situation contrasts with some neighbouring economies, which have continued to grow in 2026. 

Over the first two quarters, Germany posted growth of 0.4 percent and then 0.3 percent, Italy 0.3 percent and then 0.2 percent, and Spain 0.6 percent and then 0.7 percent. 

(with newswires)