France’s Sectors with Fewest Ties to Russia

According to data from French customs and Banque de France calculations, several sectors in France have fewer than EUR 500 million in transactions with Russia and less than 5% of all sector transactions. These sectors include:

Less Vulnerable Sectors

• Architectural and engineering services: This sector is not heavily reliant on trade with Russia.
• Aircraft and spacecraft manufacturing: Another sector that has limited ties to Russia.
• Basic pharmaceutical products and pharmaceutical preparations: The French pharmaceutical industry has minimal transactions with Russia.
• Coal and lignite mining: France’s coal mining industry has few connections to Russia.
• Metallic minerals mining: This sector is also relatively unaffected by trade with Russia.

These sectors are less vulnerable to the economic impacts of the war in Ukraine.

Global Economic Outlook

The global economy is facing a slow-flationary shock due to the war in Ukraine and lockdown measures in China. The consequences include:

Rising Commodity Prices

• Producer prices: Surging due to the war and lockdowns.
• Inflation: Rising worldwide, with significant increases in commodity prices such as:
  • Iron ore
  • Wheat
  • Lithium
  • Copper

French Economy Outlook

The French economy is expected to experience a moderate rebound in 2022, with inflation set at 5.6%. The government’s price shield measures, including a cap on energy prices, are designed to help mitigate the impact of inflation on households.

Medium-term Risk

However, the medium-term risk for price stability has shifted from low inflation to high inflation.

Emerging Markets

For many emerging countries, the war in Ukraine represents a shock that compounds tighter US monetary policy. The supply-side shock caused by reduced exports from Russia and Ukraine affects emerging countries differently, with serious food security consequences for those most dependent on Russian and Ukrainian grain exports.

Exacerbating Inflationary Pressures

This shock could exacerbate inflationary pressures already present in 2021.

Commodity Prices

[Chart 1.4: Commodity prices over the past few years]

The curves represent the value of forward sales on the futures market. The prices have seen significant increases, particularly for energy commodities such as Brent oil and European Natural Gas.

Household Confidence and Business Sentiment

Household Confidence

The summary indicator of household confidence (INSEE) has remained relatively stable.

Business Sentiment

The business confidence index (OECD) has shown a slight decline in recent months.

Note

This article is based on data from French customs and Banque de France calculations, as well as Bloomberg data on commodity prices. The economic outlook for France and emerging markets is subject to significant uncertainty due to the ongoing war in Ukraine and lockdown measures in China.