The French economy is expected to grow only 0.4% in 2026, according to new forecasts from the National Institute of Statistics and Economic Studies (INSEE), published on September 10. This figure represents a slowdown compared to the 0.9% recorded the previous year, with this summer's heatwaves subtracting 0.1 percentage points from GDP growth due to the impact on agricultural production. INSEE warned that France is losing ground to the rest of Europe due to extreme heat, the decline in public works, the deterioration of the labor market, and a complex budgetary situation.
The eurozone's second-largest economy stagnated in the second quarter of the year, after contracting 0.2% in the first three months, well below the initial forecast of 0.3% growth. The agricultural sector was the most penalized by the heatwave that lasted about 50 days between mid-June and the end of August, recording a 3.1% decline in its value added. Foreign trade was the main driver of economic activity, contributing 0.6 percentage points to GDP, thanks to the recovery in exports driven by aircraft deliveries.
INSEE forecasts 0.1% growth in the third quarter and 0.2% in the fourth quarter of 2025. For 2026 as a whole, household consumption is expected to increase by only 0.3%, while investment will contract by 0.6%. Household purchasing power is expected to decline by 0.4% this year, limiting consumption. Inflation is also expected to accelerate, rising from 2.4% in August to 2.9% by year-end, driven by the energy crisis.
The new INSEE projections are more pessimistic than those of the French government, which maintains its growth estimate at 0.7% for 2025. The Paris executive is expected to update its macroeconomic projections on Friday. The institute also warned that an escalation of the conflict in the Middle East could further increase energy costs and reduce household purchasing power and corporate profit margins.
