Rebound of the French economy, moderate inflation next year – central bank

People visit a Christmas market in Mulhouse, France December 15, 2021. REUTERS/Yves Herman

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PARIS, Dec 19 (Reuters) – French growth and inflation will slow in 2022 after a faster-than-expected recovery this year, after which a tightening labor market will boost wages, the French central bank predicted on Sunday.

The eurozone’s second-largest economy is expected to grow by 6.7% this year, the Banque de France said in its latest long-term outlook, raising its forecast from 6.3% previously.

The post-pandemic economy’s momentum would fade next year, with growth slowing to 3.6% and recovering to 2.2% in 2023 and 1.4% in 2024, the central bank said.

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He also said inflation, driven largely by high energy prices, would peak at the end of this year at around 3.5% before falling back below 2% at the end of 2022.

After that, the central bank expects inflation to stand at 1.7% in 2023-2024, a rate that would be higher than the low inflation seen in the years before the COVID pandemic and closer to the rates seen before the 2007-2008 financial crisis, the central said the bank.

As the current supply chain woes eased, prices for manufactured goods peaked next year before returning to their long-term average near zero.

Meanwhile, prices for services would gradually increase, reaching 2.7% in 2024 as a tighter labor market drove up workers’ wages, painting an inflation scenario similar to what has been seen in the years 2002 to 2007, the central bank said.

It predicted that unemployment would rise from 7.8% on average this year to 7.7% by the end of 2024. Meanwhile, private sector wage gains would hit 4% next year before falling back to 3% by thereafter, which would still be above the levels seen in the decade before the pandemic.

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Reporting by Leigh Thomas Editing by Raissa Kasolowsky

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