Banque de France slightly revises upward its outlook for the second quarter - the government’s annual target remains in the balance

Paris – 10.07.2026: The Banque de France has slightly revised upward its assessment of economic activity in the second quarter and now expects moderate growth. According to the central bank’s latest rapid survey, industry, construction and market-related services are reporting a tentative recovery. This fuels hope that the French economy may recover somewhat by mid-year, but does not change the fact that the outlook for 2026 remains fragile overall.

Already in the macroeconomic projections published in June, the central bank had taken a more cautious stance than in spring. In addition to weaker foreign demand, rising price levels in some product groups and uncertainties over energy supplies remain a burden. At the same time, falling inflation rates are gradually supporting real incomes, which could stabilize consumption during the rest of the year. However, it remains unclear whether this effect will offset slower business investment.

At the beginning of July, the Ministère de l’Économie et des Finances had lowered its annual forecast to 0.7%. In Bercy, the Banque de France’s slight upward revision is seen as an opportunity to achieve this target. However, the margins are narrow: even small deviations in quarterly momentum are directly reflected in tax revenues and deficit levels. For budget planning, this means that higher additional revenues can only be expected if the quarterly pace is maintained, while renewed weakening would quickly produce the opposite effects.

Three factors remain decisive in the short term. First, inflation developments in the euro area and their effect on purchasing power: a faster decline would support private consumption, whereas a plateau would once again squeeze real wages. Second, the interest rate situation following recent decisions in the Eurosystem: more favorable financing conditions could stimulate investment, while persistently high real interest rates would curb credit demand. Third, foreign demand from key trading partners, particularly the rest of the euro area, which would need to recover in 2025/26 to provide a significant boost to exports.

For economic policy, this results in a balance between reliability and flexibility. A positive gross domestic product surprise in the second half of the year would slightly expand fiscal room for maneuver, for example for targeted relief measures or investment incentives. If the recovery remains weak, however, pressure would increase to set stricter budget priorities and postpone planned measures. Until the official quarterly data are published by the statistical office, ministries and supervisory authorities will therefore closely monitor upcoming business surveys and labor market and price indicators.

Ultimately, the Banque de France’s upward revision improves the likelihood of achieving the government’s 0.7% forecast for 2026. However, it is not a guarantee: the next data on consumption and investment, energy price developments and the situation in the euro area will continue to be decisive.