French central bank sees higher growth ahead - if political clouds clear

PARIS, Dec 19 (Reuters) - The ⁠French economy ⁠is ‍expected to post modest but steady growth in the coming years, driven by a recovery in household spending ‍and business investment if political uncertainty clears, the central ​bank said on Friday in an update to its long-term outlook.

The euro ​zone's second-largest economy is now forecast to expand by 0.9% in 2025, after a stronger-than-expected second half boosted by aerospace exports and corporate investment, the ​Bank of France said. That marks an upward revision from its previous estimate of 0.7% in September.

Growth is projected ​at 1.0% in both 2026 and 2027, before edging up to 1.1% in 2028, the ‌bank added. Earlier forecasts had pencilled in 0.9% for 2026 and 1.1% for 2027, with no prior ​estimate for 2028.

Household spending is expected ⁠to rebound next year, supported by real wage gains despite a softer labour market. Business investment ‌was seen strengthening in 2026 and 2027, provided political and fiscal uncertainty does not deepen ahead of the 2027 presidential election.

Both household spending ‌and business investment have been subdued since President Emmanuel Macron called a snap ‌legislative election in 2024 that delivered a hung parliament.

Lawmakers are due to try to break a deadlock on Friday over the 2026 budget with ‍talks to negotiate a compromise text to submit to a vote in parliament on Tuesday.

The central ⁠bank forecast inflation would remain below the ECB's 2% target over the next three years, rising from 0.9% this year to 1.3% in 2026 and 2027 before reaching 1.8% in 2028.

(Reporting by Leigh Thomas; Editing by Hugh Lawson)

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