France lowers 2026 growth forecast to 0.5% as budget deficit exceeds 5%

Revised growth projections and fiscal constraints

The French government revised its gross domestic product growth forecast for 2026 down to 0.5% on Friday, 11 September 2026, reducing expectations from the 0.7% projected in early July. Economy and Finance Minister Roland Lescure announced the updated macroeconomic framework during a morning press conference, marking the third downward revision to growth expectations this year. Lescure announced that the public deficit will exceed 5% of economic output in 2026, stating that keeping the deficit under 5% is no longer an option. The revised numbers serve as the baseline for the draft 2027 budget prepared under Prime Minister Sébastien Lecornu. Lescure called for swift parliamentary adoption of the upcoming finance bill, stressing that the state has depleted its fiscal buffers.

It is reasonable to say that economic uncertainties have never been so strong.

Domestic contraction and divergence from European peers

The government revision followed the quarterly economic report published on Thursday, 10 September by the national statistics bureau Insee, which projected an even lower annual growth rate of 0.4% for 2026. Official data showed that French economic output contracted by 0.2% in the first quarter of 2026 and stagnated at 0.0% in the second quarter. The stagnation contrasted with performance across other large European economies over the same six-month span. In the first quarter, gross domestic product grew by 0.4% in Germany, 0.3% in Italy, 0.6% in Spain, and 0.6% in the United Kingdom.

During the second quarter, German GDP expanded by 0.3%, Italian output grew by 0.2%, Spanish output increased by 0.7%, and British GDP expanded by 0.4%. Dorian Roucher, head of the business cycle department at Insee, noted during a press briefing that French economic activity dropped during the winter and remained flat in spring, contrary to trends across the rest of Europe.

Contrary to its neighbours, the French economy has stalled. Unlike the rest of Europe, activity weakened this winter and remained flat in the spring. This is a surprise that we had not anticipated.

Four shocks behind the slowdown

Lescure listed four distinct shocks that affected French economic activity throughout 2026. The first factor was a standard post-electoral decline in public works following municipal elections, which curbed local infrastructure spending. The second factor was domestic political uncertainty, which dampened corporate decision-making and consumer spending. The third was the conflict in the Middle East and an ongoing fuel crisis, alongside maritime disruptions in the Strait of Hormuz. The fourth factor was environmental, specifically severe summer heatwaves and wildfires. Insee data indicated that heatwaves reduced agricultural production, deducting 0.1 percentage point directly from French GDP growth.

Outlook for 2027 and upcoming budget debate

The executive based its 2027 economic framework on a projected GDP expansion of 1.0%, excluding inflation. The government expects consumer price inflation to reach 2.1% in 2026, with a peak of 2.6% near the end of the year, before falling to 1.8% in 2027. The 2027 projection assumes a rebound in household consumption and a normalization of maritime transit through the Strait of Hormuz. Lescure emphasized that fiscal consolidation will require shared effort in the upcoming finance bill while maintaining fundamental growth drivers. Parliament is scheduled to debate the 2027 budget under the updated macroeconomic assumptions in the coming weeks.

We have no margin left: there is an imperative need to adopt a budget as soon as possible.