Moody's Downgrades France's 2026 Growth Forecast to a Mere 0.2% Amid Economic Challenges

On November 11, Moody's issued a sharply downgraded forecast for France's economic growth in 2026, predicting a GDP increase of only 0.2%. This starkly contrasts with national estimates, as Insee projects 0.4%, the Bank of France anticipates near 0.3%, and the government targets 0.5%. Moody's previous forecast in April had envisaged a more optimistic 1% growth, but this has been revised downward due to political uncertainty, rising bond yields, budgetary constraints, and tightening credit conditions.

Moody's outlook foresees a cautious recovery beginning in 2027, with growth expected at 0.7%, and further improvement to 1.2% in 2028. French institutions remain slightly more optimistic, with Insee and the Bank of France predicting a rebound towards 0.9% to 1.2% growth by 2027 and 2028. The High Council of Public Finances (HCFP) has expressed skepticism over the government's 0.5% growth goal, suggesting 0.3% as a more realistic estimate.

In addition, Moody's forecasts that France will sustain lower inflation rates than its European peers, estimating 2.5% inflation in 2026 compared to 3.3% in Italy, 2.8% in Germany, and 3.1% in the UK. This trend of relatively subdued inflation is expected to continue through 2027 and 2028, potentially offering some relief amid slow economic growth.