French central bank trims growth outlook on trade tensions

PARIS (Reuters) - France's economy will slow more this year and next than previously expected as trade tensions hit demand for French exports, the central bank said on Wednesday in its quarterly outlook.

The euro zone's second-biggest economy is set to slow from 1.1% growth last year to 0.7% this year, the Bank of France forecast, revising its 2025 estimate down from 0.9% previously.

The central bank estimated the economic uncertainty created by various tariff threats from U.S. President Donald Trump shaved 0.1 percentage points off the outlook for this year.

"Our projection takes into account the uncertain context created by tariff measures evoked by the Trump administration (other than tariff increases on China)," the central bank said in its outlook.

If the threats materialised into real tariff increases, France could expect a smaller hit than some other EU countries because its exports are less exposed to the U.S. market, the Bank of France said.

Looking ahead, improved business investment would boost growth to 1.2% in 2026 (revised down from 1.3% previously) and to 1.3% in 2027 (unrevised).

The central bank also said that inflation would come in weaker than expected until now due to lower regulated electricity prices and softer service prices added to slower wage growth.

Calculated using an EU-wide harmonised method, inflation was set to average only 1.3% this year, down from an estimate in December for 1.6%.

Inflation would pick up next year to 1.6% and reach 1.9% in 2027, which meant wages were likely to grow faster than inflation over the period, boosting consumer purchasing power.

The central bank said its short-term economic outlook, based on a monthly survey of 8,500 firms, suggested the economy would growth 0.1-0.2% in the first quarter from the previous quarter.

(Reporting by Leigh Thomas; Editing by Alexandra Hudson)