AA / Paris / Ümit Dönmez
The purchasing power of the French could experience its biggest drop in a decade in 2022, according to forecasts by a non-governmental organization (NGO).
According to a report [1] published on Thursday June 9, the French Observatory of Economic Conditions (OFCE), expects purchasing power to decline “on average by 0.8% this year”, and this “despite the measures taken by the government, including the recently announced 4% pension increase” [2].
This would be the largest drop “since 2013, a year marked by a large-scale fiscal shock” and a decline in purchasing power of more than 1%, according to the OFCE.
In the first quarter of 2022, “the constraints generated by the Omicron wave [de la Covid-19, NDLR] and the decline in purchasing power linked to the rise in energy prices led to a 1.5% contraction in household consumption, the largest drop in more than 70 years outside of the episode Covid of 2020,” the independent body reported.
The drop in household consumption alone contributed to reducing GDP by 0.8% in the first quarter of 2022, the NGO also noted, specifying that “this contraction in purchasing power will weigh on the dynamics of recovery through the weak dynamic of household consumption in the absence of a reduction in the savings rate in a context marked by strong geopolitical uncertainties”.
The OFCE cites a few major factors that have affected the growth dynamic since the second half of 2021, linked to a “rapid change in the international environment: new epidemic wave, strengthening of supply difficulties with the “Zero-Covid” strategy of China, sharp rise in energy prices and war in Ukraine, rising geopolitical uncertainty and expected rate hikes in the face of persistent inflation [3].
The authors of the report forecast an average inflation of 4.9% in 2022, “with energy prices rising by 22% on average over the year”.
Read also :
1. “Shock-proof growth – Outlook for the French economy 2022” – OFCE report, published on June 9, 2022
https://www.ofce.sciences-po.fr/pdf/pbrief/2022/OFCEpbrief107.pdf
2. “France: Elisabeth Borne announces a 4% increase in retirement pensions in July” – Anadolu Agency, June 8, 2022
https://www.aa.com.tr/fr/monde/france-%C3%A9lisabeth-borne-annonce-une-revalorisation-de-4-des-pensions-de-retraite-en-juillet/2608943
3. “European Central Bank Announces Further Interest Rate Hikes”, Anadolu Agency, June 9, 2022
https://www.aa.com.tr/fr/monde/la-banque-centrale-europ%c3%a9enne-annonce-de-nouvelles-hausses-de-ses-taux-dint%c3%a9r%c3%aat/2610029
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