ECB’s Villeroy: Even Under Severe Scenario, See French 2022 GDP Growth at 2.8%

14 March 2022

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau on Monday said that even under a severe scenario, the economic shock related to Russian military aggression against Ukraine would not prevent the French economy from expanding this year by almost 3%.

In an interview with French daily Le Parisien-Aujourd'hui en France, Villeroy, who heads Banque de France, said that the Russian assault on its neighbour ‘is a negative economic shock, even if it is at least five times stronger for Russia than for Europe and France. It means less growth and more inflation, but in uncertain proportions: in the face of uncertainty, we are publishing two economic forecast scenarios, which is unprecedented.’

The two scenarios differ primarily in assumptions regarding oil and gas prices, he said. ‘In the moderate scenario, with a barrel price close to 100 dollars until April and then gradually falling, we would have growth at 3.4% in 2022’, he said. ‘In the second, worse scenario, with a barrel at 125 dollars until the end of 2024, we would be at 2.8% this year.’

France could have expected growth of 3.9% this year without the war, he said, observing that the Omicron variant of the coronavirus ‘had hardly any impact on the business.’ Still, until 2024, a recession is ruled out, he said.

With the French having “Covid savings” estimated at €175 billion that are starting to be used, consumption this year should grow at least 4%, he said.

Though the shock from the war is less severe than that related to the pandemic, the consequences over time could be greater, he said.