PARIS, Dec 16 — France’s economy is expected to contract by 0.2 per cent this quarter, the national statistics agency INSEE said Thursday, as consumer spending is squeezed by inflation predicted to peak at 7.0 per cent early next year.

France is nevertheless expected to dodge a recession, which is usually defined as two consecutive quarters of contraction, with INSEE seeing a tepid rebound of 0.1 per cent at the start of 2023.

It forecasts growth picking up to 0.3 per cent in the second quarter of 2023.

Overall, INSEE expects the French economy to post 2.5 per cent growth in 2022.

Julien Pouget, the head of INSEE’s forecasting unit, said the fourth quarter was more likely a "passing cold” than a more serious illness for the French economy.

But with the European Central Bank raising its main interest rate by 0.5 per cent on Thursday, and warning more such hikes were on the way in order to tame inflation, the forecast in the eurozone is not rosy.

The ECB cut its 2023 eurozone growth outlook to 0.5 per cent.

INSEE did not provide figures for economic growth in 2023.

The French government expects 1.0 per cent growth next year, but independent forecasters consider that too optimistic. — AFP