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Macroeconomic projections – March 2022

The war in Ukraine is a major geopolitical event which has already started to weigh on current macroeconomic developments. There has also been a very sharp increase in uncertainty over future developments. In light of these exceptional circumstances, we are presenting two contrasting macroeconomic scenarios for 2022-24. The first, called the “conventional” scenario, is based on assumptions with a cut-off date of 28 February, in line with the Eurosystem’s rules. The second or “degraded” scenario examines the additional effect of an even sharper rise in the price of oil, natural gas and wheat (as observed at the start of March), with prices remaining elevated over the entire projection horizon, combined with a major uncertainty shock. Under both scenarios, the shocks to the French economy are large, even though they gradually recede up to 2024.

Despite the size of the external shock, the recovery dynamics observed up till now and the usual macroeconomic adjustment mechanisms are still major cushioning factors. French and European public policies will also probably evolve (the scenarios incorporate the information available up to the start of March, including the “price shield” in France for 2022, but no assumption is made regarding measures under the resilience plan).

Thanks to the recovery seen throughout 2021, the growth carry-over for 2022 is estimated at 2.9% at the end of the first quarter. As a result, despite the slowdown anticipated over coming quarters, GDP growth should reach 3.4% in annual average terms in 2022 under our conventional scenario, and 2.8% under the degraded scenario. Inflation is expected to be high in 2022, driven notably by the energy component: under the conventional scenario it is expected to average 3.7% over the year and to remain close to 4.0% at least until September, while under the degraded scenario it should reach 4.4% in 2022.

In 2023, growth should continue to be affected by the shocks in the degraded scenario (1.3%), but is projected to remain above potential under the conventional scenario (2.0%). Inflation is projected to come back towards 2.0% in annual average terms in 2023 under the conventional scenario, but to remain high under the degraded scenario (at 3.3%).

For 2024, growth should come back closer to the trajectory seen prior to the Ukraine conflict, especially under the conventional scenario. Once the current major shock has passed, and in line with our December forecast, this scenario sees inflation excluding energy and food settling at a higher rate in 2024 than that seen over the past decade, at close to 2%.

Under the degraded scenario, the cumulative loss of GDP in 2024 compared with our December projections should be just under 2 percentage points.

The risks remain high and these scenarios clearly do not cover the full range of possible outcomes. In particular, an abrupt stoppage of energy imports from Russia would probably have greater consequences for the economy and for financial markets, but these are hard to quantify at this stage.

Macroeconomic projections – March 2022


A report from ACPR on an overview of new payment players

Ten years after the opening of the payments market, the ACPR published a report on the main developments in the sector marked by the emergence of new players - payment institutions, electronic money institutions and their agents - who have modernised payment services for the benefit of businesses and individuals. With a view to the forthcoming review of the PSD2, the Authority shares the main lessons from their supervision.

Report from ACPR on an overview of new payment players


A conference on Monetary policy during the pandemic

The International Macroeconomics Chair, Banque de France - PSE has the pleasure to invite you to a lecture given by Philip R. Lane (European Central Bank) on March 31, 2022. The lecture will be held at PSE - Paris School of Economics and will be broadcast online (Zoom).

Date: March 31, 2022 ; 10:00am-11:30am (Paris Time)
Venue: PSE - Paris School of Economics (Auditorium) and on Zoom

Philip R. Lane joined the European Central Bank as a Member of the Executive Board in 2019. He is responsible for the Directorate General Economics and the Directorate General Monetary Policy. Before joining the ECB, he was the Governor of the Central Bank of Ireland. He has also chaired the Advisory Scientific Committee and Advisory Technical Committee of the European Systemic Risk Board and was Whately Professor of Political Economy at Trinity College Dublin. He is also a research fellow at the Centre for Economic Policy Research. A graduate of Trinity College Dublin, he was awarded a PhD in Economics from Harvard University in 1995 and was Assistant Professor of Economics and International Affairs at Columbia University from 1995 to 1997, before returning to Dublin. In 2001 he was the inaugural recipient of the Bernácer Prize for outstanding contributions to European monetary economics.

Lecture by Philip R. Lane: “Monetary policy during the pandemic”  


A blog post on Exchange rate flexibility and resilience to external shocks in Sub-Saharan Africa

The Covid-19 crisis, combining supply and demand shocks with associated inflationary pressures, provides an opportunity to reassess the advantages of fixed exchange rate regimes over flexible or intermediate exchange rate regimes, in particular in Sub-Saharan Africa (SSA). Indeed, in this context, the anchoring of the currency via the fixed exchange rate gives more monetary policy space…

Exchange rate flexibility and resilience to external shocks in Sub-Saharan Africa


A blog post on Advantages of point targets and drawbacks of target ranges

A central bank’s inflation objective can be formulated using a point target, a target range or a combination of the two. In this blog, we show the disadvantages of a target range for anchoring inflation expectations and for macroeconomic stabilisation. The analysis thereby underpins the ECB’s adoption of a clear and symmetric 2% inflation point target.

Advantages of point targets and drawbacks of target ranges


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