PARIS - France's economy saw a boost in the third quarter, fueled by the Paris Olympics, but is expected to decline before the end of the year, according to the latest forecast from the country's INSEE statistics agency.
The influx of tourists attending the Olympics helped drive consumer spending in the second-largest economy in the euro zone, providing some relief amidst political uncertainty following July's hung parliament.
INSEE projects a growth of 0.4% in the third quarter, down from the previous estimate of 0.5%, with the Olympics contributing a significant 0.3% boost from ticket sales, broadcasting rights, and tourism-related expenditures.
However, as the Olympic effect fades, the economy is expected to contract by 0.1% in the fourth quarter, resulting in a full-year growth rate of 1.1%, unchanged from previous estimates.
The government's outlook for 2024 aligns with INSEE's forecast, with Finance Minister Bruno Le Maire hinting at slightly stronger growth potential due to the Olympics.
Political instability continues to pose a challenge, as newly appointed Prime Minister Michel Barnier faces the task of forming a cabinet and drafting a budget amid a divided parliament.
Businesses are likely to remain cautious amidst the ongoing political crisis, leading to delays in investment plans, especially with high interest rates. Additionally, weakness in the German economy, France's largest trading partner, adds further uncertainty for French exporters.
On the bright side, lower inflation is expected to boost household purchasing power, offsetting some of the post-Olympic decline in consumer spending. INSEE projects inflation to remain below 2% for the remainder of the year, reaching 1.6% by December.
Analysis:
The Paris Olympics provided a temporary boost to France's economy in the third quarter, but the country is expected to face challenges in the coming months. Political uncertainty, business caution, and external economic factors could impact growth prospects. However, lower inflation may help support consumer purchasing power. Individuals should stay informed about these developments to make informed decisions regarding their finances and investments.