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Legislative: Level of uncertainty among business leaders ‘at highest level’ from 2022

Legislative: Level of uncertainty among business leaders ‘at highest level’ from 2022

Legislative: Level of uncertainty among business leaders ‘at highest level’ from 2022

France’s economic growth is struggling, but for how long? The Bank of France said on Wednesday it expects GDP to grow by 0.1% in the second quarter, but pointed to “uncertainty” among business leaders unprecedented since 2022 due to the political context.

After expanding 0.2% in the first quarter, GDP should grow at half that rate in the April-June period, helped by a “moderate recovery” in activity in June, the central bank wrote in its latest monthly economic review.

The survey, conducted among 8,500 entrepreneurs between June 26 and July 3, highlights above all the uncertainty of business leaders in the face of a political context marked by snap legislative elections on June 30 and July 7. The latter saw the New Popular Front (NPF) emerge as the leader in the second round and the National Rally significantly increase its contingent of deputies, but without a clear majority in the new National Assembly.

High level care

The Bank of France’s uncertainty indicator, based on the frequency of certain keywords in entrepreneurs’ responses, “reaches its highest level since 2022, or even since 2021 in the case of services,” the central bank emphasizes. “It is progressing in all sectors, and especially in services (especially temporary work, accommodation and food, transport, advertising), where it was initially lowest,” she explains.

“Many business leaders (…) note a wait-and-see attitude on the part of clients, a postponement of investments, including from abroad, as well as a freeze on recruitment due to a lack of transparency about possible changes in wage costs,” the NFP wants to increase the minimum wage by more than 200 euros to bring it to 1,600 euros net.

However, the uncertainty indicator remains below the level reached in 2020 during the first two Covid-19 pandemic-related restrictions.

Olympics as hope

However, this sharp increase in uncertainty among entrepreneurs has not yet been clearly reflected in the activity of the second quarter, explains Olivier Garnier, chief economist at the Bank of France. It could materialize even more in the third quarter, even if the Olympic and Paralympic Games, on the contrary, support activity.

The hosting of the world’s largest sporting event in France will contribute 0.3 points to GDP growth in the third quarter, or more than half of the expected increase in the July-September period (0.5%), according to an INSEE economic report published on Tuesday.

If Olivier Garnier predicts a “positive impact” on activity from the Olympic Games (26 July – 11 August) and the Paralympic Games (28 August – 8 September), he does not risk naming figures, preferring to comment on the development of activity observed in the 2nd quarter.

Source: Le Parisien

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