Bank of France Highlights French Economic Resilience amid Iran Conflict Uncertainties

The Bank of France (BdF) reports that the French economy remains resilient despite significant uncertainties stemming from the ongoing Iran conflict. However, the BdF refrained from providing a GDP growth estimate for the second quarter of 2026, citing excessive uncertainty regarding the duration and consequences of the conflict.

Economic activity displayed moderate growth in April, largely fueled by robust industrial production in sectors such as electrical equipment, aeronautics, and electronic optical products, with notable contributions from the defense industry. Still, the rising price of oil is driving higher costs for raw materials and transportation, straining businesses across various sectors.

Business leaders expressed increasing concern over these cost pressures and logistical disruptions, particularly within energy-intensive industries. The services sector, including transportation and logistics, has seen shrinking profit margins due to fluctuations in fuel prices. Looking ahead to May, a slight decline in activity is forecasted in industry, construction, and a more pronounced downturn in services—the first service sector decrease since March 2025.

These developments come after a stagnant GDP in the first quarter of 2026, as reported by Insee, contrasting with the BdF’s earlier forecast of 0.3% growth. The month-to-month shifts indicate that while the French economy is managing the current pressures, uncertainty remains elevated amid the geopolitical tensions.