French architecture in France

France GDP Q4 2021

France: Economic growth moderates in Q4; GDP surpasses pre-pandemic level

GDP growth lost momentum, falling to 0.7% on a seasonally-adjusted quarter-on-quarter basis in the fourth quarter, from 3.1% in the third quarter. On an annual basis, economic growth accelerated to 5.4% in Q4, following Q3’s 3.5% increase. As such, for the year as a whole, the economy expanded 7.0% in 2021, rebounding from the 8.0% contraction logged in 2020 and making a return to its pre-pandemic size.

Domestically, private consumption growth fell to 0.5% in Q4, marking the weakest expansion since Q1 2021 (Q3: +5.5% s.a. qoq). Public consumption growth moderated to 0.3% in Q4 (Q3: +2.6% s.a. qoq). Meanwhile, fixed investment growth accelerated to 0.6% in Q4, having flatlined in the previous quarter.

Externally, exports of goods and services growth improved to 3.1% in seasonally-adjusted quarter-on-quarter terms in the final quarter, which marked the best reading since Q4 2020 (Q3: +1.7% s.a. qoq). In addition, imports of goods and services growth picked up to 3.9% in Q4 (Q3: +1.0% s.a. qoq), marking the best performance in a year. Consequently, the external sector detracted 0.3 percentage points from the overall reading in Q4, contrasting the 0.2 percentage point contribution in the previous quarter.

Looking to the current quarter, high-frequency indicators paint a favorable picture for the economy. Moreover, easing restrictions in February should further bolster household spending. That said, the Russian invasion of Ukraine, as well as the international sanctions rolled out in response, will likely have negative repercussions at home.

Regarding the impact of this developing conflict, Charlotte de Montpellier, economist at ING, remarked:

“The current situation in Ukraine will probably force us to revise our forecast. As a result of the conflict, energy prices might remain higher for longer, pushing our inflation forecast even higher. On the other hand, our growth forecasts will be revised downwards, especially for the second and third quarters. The energy price shock will weigh on businesses and households, negatively impacting growth. Confidence is also likely to deteriorate, further limiting the growth of economic activity. That said, at this stage, we continue to expect a growth scenario and do not foresee a recession.”

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