Banque de France slightly raises outlook for the second quarter – Government’s full-year target still uncertain

Paris – 10 July 2026: Banque de France has slightly revised its assessment of economic activity in the second quarter upward and now expects moderate growth. According to the central bank’s latest short survey, industry, construction and market-related services are showing signs of a slight recovery. This raises hopes that the French economy could pick up somewhat in the middle of the year, but does not change the fact that the outlook for 2026 generally remains fragile.

In the macroeconomic forecasts it published in June, the central bank maintained a more cautious stance than in spring. In addition to weaker external demand, pressure remains from high prices in some product groups and uncertainty over energy imports. At the same time, declining inflation is gradually supporting real incomes, which could stabilize consumption for the rest of the year. Whether this effect can offset sluggish business investment remains an open question.

The Ministry of Economy and Finance lowered its full-year forecast to 0.7% at the beginning of July. At Bercy, Banque de France’s slight upward revision is seen as an opportunity to meet this target. However, the scope for action is very narrow: even small deviations in quarterly momentum have a direct impact on tax revenues and deficit figures. For budget planning, this means that additional revenue can only be expected if the quarterly pace is maintained, while another slowdown would quickly reverse this effect.

In the short term, three factors are decisive. First is inflation developments in the euro area and their impact on purchasing power: a faster decline would support private consumption, while a standstill would continue to put pressure on real wages. Second is the interest-rate situation following recent decisions in the Eurosystem: easier financial conditions could stimulate investment, while persistently high real interest rates would dampen credit demand. Third, external demand from key trading partners, especially from the rest of the euro area, must recover in 2025/26 in order to significantly boost exports.

For economic policy, this requires a balance between credibility and flexibility. A positive surprise in gross domestic product in the second half of the year would slightly expand fiscal policy room, for example for targeted relief measures or investment incentives. If the recovery remains weak, pressure will increase to tighten budget priorities and postpone planned measures. Until the statistical office publishes official quarterly figures, ministries and supervisory bodies will closely monitor subsequent business surveys as well as labor market and price indicators.

In summary, Banque de France’s slight upward revision improves the chances of achieving the government’s 0.7% forecast for 2026. However, nothing is guaranteed: the next consumption and investment data, energy price developments and the situation in the euro area will remain decisive factors.