May 17, 2022

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Ukraine conflict: France’s inflation forecast over 5% in 2022

Ukraine conflict: France's inflation forecast over 5% in 2022
by Faisal Al-Ismaily On 09/03/2022 at 11:05 PM (Updated on 09/03/2022 at 11:06 PM)

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Booth 360. After the crisis caused by the COVID-19 pandemic, the Ukraine conflict will also have repercussions on the French economy. OFCE Economist Mathieu Plane expects inflation to reach more than 5% in 2022. This article is a press review from the La Tribune website.

The energy price hike is already evident, but this is only the beginning. While the peak of inflation, under the influence of the post-Covid-19 recovery, was supposed to be temporary, it risks being stronger and above all lasting over time due to the Ukraine conflict, Matthew Blaine predicts. The Observatory of Economic Conditions (OFCE), which gave an interview to the site exhibition March 9.

Also, the purchasing power of French households will be severely affected. “If pensions, social minimums, and minimum wages are linked to inflation, this is not the case for salaries,” the specialist points out. Even if revenue is expected to increase between 2 and 3%, “companies will not necessarily exceed that.”

For this expert, inflation, currently at 3.6%, should exceed 5% in the coming weeks. Faced with such a situation that the French have not known for decades, the state will have to act and “absorb this increase.” “If pensions are to be increased by a few points to 16 million retirees to 5%, for example, then it is not neutral …”, Matthew Blaine specifies.

Although more than 700,000 jobs were created last year in France, unemployment should also rise. “In this context, firms are likely to invest less, to be more cautious in hiring,” he warns. And to continue: “As prices rise, consumption promises to fall. We will spend less. Fearing the future, the French are likely to go to restaurants less, go out less, limit their purchases, and behave cautiously. So activity promises weakness. For Mathieu Plane, a shock is formed Economical… permanently.

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Written by Faisal Al-Ismaili