How the warfare within the Middle East “impacts” the French financial system | EUROtoday

An financial system that finds itself “impacted by global disorders”. In France, development ought to be much less good than anticipated within the first and second quarters, attributable to inflation linked to the rise in hydrocarbon costs, even when it “will resist” at this stage, indicated the National Institute of Statistics and Economic Studies (Insee) on Tuesday March 24.

After development of 0.5% within the third quarter of 2025, then a slowdown to 0.2% within the fourth quarter, INSEE as soon as once more forecasts a rise of 0.2% in gross home product (GDP) within the first and second quarters of 2026, it’s specified.

This is beneath the earlier estimate from December: INSEE then anticipated development of 0.3% within the first quarter and the identical within the second.

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“The international environment has suddenly changed,” mentioned the pinnacle of the INSEE financial division, Dorian Roucher, throughout a press convention.

“Weakened” development

The rise in gasoline and oil costs, “which are close to 100 dollars compared to just over 60 dollars” earlier than the battle “would propel inflation beyond 3% by June in the euro zone as in the United States and around 2% in France” throughout “the spring”, he added.

This “sudden rise” in inflation wouldn’t but “contaminate other sectors” within the first half of the yr, besides “air transport”, because of the value of kerosene, in keeping with INSEE.

The statistical institute, which assumes that oil costs will stay round $100 till June, estimates that development could be “weakened”, however would “resist” at this stage. “The economic surveys were rather encouraging until the outbreak of the conflict, which makes us think that in the very short term, growth is resilient thanks to this recovery momentum which was already underway,” underlined Dorian Roucher.

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But INSEE warns: an intensification of the battle, significantly within the occasion of destruction of the hydrocarbon manufacturing capacities of the Gulf international locations, “would lead to an even more marked increase in prices”, with extra severe results on the financial system.

At the identical time, the Minister of the Economy, Roland Lescure, assured the National Assembly on Tuesday that the warfare within the Middle East was inflicting “a new oil shock”. “The hypothesis of a temporary crisis, the economic consequences of which would disappear with the end of the bombings, is unfortunately no longer relevant,” he mentioned earlier than the Finance Committee.

What results on households?

Households shall be affected by the resurgence of inflation, significantly their buying energy, which might “falter”. “It is the households who would pay the bill in the short term,” insisted Dorian Rocher.

Household consumption “would be slowed down”, underlines INSEE, however the impact “would not be immediate”, as a result of the French would attenuate the inflationary shock by drawing on their financial savings.

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In the primary quarter, consumption ought to decelerate considerably (+0.1% after +0.4%), however primarily because of the delicate winter. In the second quarter, the rebound could be restricted (+ 0.2%), households “beginning to restrict their spending” below the impact of inflation.

The institute famous a “rush to gas stations at the beginning of March”, by analyzing bank card funds on the pump. But he predicts that it “should not have an impact on consumption for the quarter, because it would be offset by lower purchases in the second part of the month”.

For INSEE, which has not but given a forecast for the second half of the yr, “most of the effects” of the warfare within the Middle East shall be “expected in the second half of the year”.

With AFP