The French economy is expected to decelerate more than initially anticipated this year and next due to weakened demand for French exports amid trade tensions, according to the central bank's quarterly report released on Wednesday.

The Bank of France projects the eurozone's second-largest economy will shrink from 1.1% growth last year to 0.7% in 2024, with the 2025 forecast lowered from 0.9%.

The Central Bank estimated that economic uncertainty stemming from various tariff threats by US President Donald Trump has reduced this year's growth forecast by 0.1 percentage points, according to Reuters news agency reports.

“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 stated within its outlook.

If the tariff threats were to turn into actual increases, France would likely face a smaller impact than some other EU nations, as its exports are less reliant on the US market, according to the Bank of France.

Looking forward, stronger business investment is expected to lift growth to 1.2% in 2026, down from the previous forecast of 1.3%, while the 2027 growth forecast remains unchanged at 1.3%.

The central bank also noted that inflation will be weaker than previously expected, driven by lower regulated electricity prices, subdued service prices, and slower wage growth.

Using the EU-wide harmonised method, inflation is now forecast to average just 1.3% this year, down from the 1.6% estimated in December.

Furthermore, inflation is expected to rise to 1.6% next year and reach 1.9% by 2027, allowing wages to grow faster than inflation and strengthen consumer purchasing power.

The Bank of France’s short-term outlook, based on a monthly survey of 8,500 firms, indicates the economy will grow by 0.1-0.2% in the first quarter compared to the previous quarter.