French economy to shrink in fourth quarter: INSEE

France’s economy is expected to contract by 0.2 percent this quarter, the national statistics agency INSEE said Thursday, as consumer spending is squeezed by inflation predicted to peak at 7.0 percent early next year.

France is nevertheless expected to dodge a recession, which is usually defined as two consecutive quarters of contraction, with INSEE seeing a tepid rebound of 0.1 percent at the start of 2023.

It forecastsgrowth picking up to 0.3 percent in the second quarter of 2023.

Overall, INSEE expects the French economy to post 2.5 percent growth in 2022.

Julien Pouget, the head of INSEE’s forecasting unit, said the fourth quarter was more likely a “passing cold” than a more serious illness for the French economy.

But with the European Central Bank raising its main interest rate by 0.5 percent on Thursday, and warning more such hikes were on the way in order to tame inflation, the forecast in the eurozone is not rosy.

The ECB cut its 2023 eurozone growth outlook to 0.5 percent.

INSEE did not provide figures for economic growth in 2023.

The French government expects 1.0 percent growth next year, but independent forecasters consider that too optimistic.