France cuts 2026 growth forecast to 0.5%

Finance Minister Roland Lescure said inflation is now expected at 2.1% this year, up from an earlier 1.3% forecast, with prices seen peaking near 3% by year-end before easing to 1.8% in 2027. He also said France’s economy should grow 1% in 2027, suggesting officials still expect a recovery after next year’s slowdown.

The revision is the third this year and brings the government closer to the Bank of France and Insee, which on Thursday forecast 2026 growth of 0.4% and warned that France’s economy is “decroche,” or losing ground, versus neighbors in Europe. The gap highlights a fragile domestic outlook at a time when households and businesses are already absorbing higher fuel costs.

Lescure said gasoline and diesel prices remain elevated, with French pump prices on Friday at about 2.10 euros a liter for gasoline and 2.30 euros for diesel. He said tensions around the Strait of Hormuz remain unresolved, keeping energy markets a live risk for inflation and growth.

For investors, the combination of slower growth, higher inflation and a budget deficit above 5% argues for continued pressure on French assets tied to domestic demand and public finances, even as broader European markets assess whether the slowdown stays contained. The next catalysts are the government’s 2027 budget plans and any further move in energy prices, which will shape both the fiscal outlook and the pace of disinflation.