Olympic Games: A Mixed Bag for the French Economy

The Olympic Games' effect on the French economy will likely drive growth in 2023, according to INSEE. The Games are expected to boost GDP thanks to ticket sales, TV rights, and tourism. However, political instability and rising costs pose risks. INSEE predicts 1.1% GDP growth, mirroring 2023 levels.

The Olympic Games' effect on the French economy will likely drive the country's economic growth this year, according to the INSEE statistics institute, even though France's volatile political situation could endanger its forecasts. INSEE reports quarterly growth in the third quarter will accelerate to 0.5%, up from 0.3% in the prior three months.

Set for July and August, the Olympics are expected to contribute 0.3 percentage points to economic growth due to increased ticket and TV rights sales and a surge in tourism. This mirrors the economic boost seen during the London 2012 Olympics, according to INSEE economist Dorian Roucher.

However, the overall impact might be more modest than anticipated, as high travel costs, political instability, and security concerns dissuade many sports fans. Flight bookings are predicted to go up by 10% year-on-year during the summer, according to ForwardKeys.

Paris, already a crowded and expensive tourist hotspot, may see Olympics visitors simply replacing traditional tourists, who may delay or cancel their trips. As the Paris Olympics' impact fades, INSEE projects the French economy will contract by 0.1% in the fourth quarter compared to the third quarter.

Resultantly, annual GDP growth is expected to remain at 1.1% for the year, matching the rate seen in 2023. Political instability following a hung parliament from Sunday's election may jeopardize these forecasts, INSEE warned.

The French economy stands to benefit from increased household consumption due to the Olympics, though investment will likely stagnate in the latter half of the year, hindered by high interest rates. INSEE forecasts inflation will continue its downward trend, ending the year at 1.9% in December, down from 2.1% in June.

(With inputs from agencies.)