PARIS (Reuters) - The Olympic Games' effect on the French economy will likely buoy the country's economic growth this year, the INSEE statistics institute said on Tuesday, although it warned France's volatile political situation could jeopardise its forecasts.
Quarterly growth in the third quarter will speed up to 0.5% from 0.3% in the prior three-month period, said INSEE.
The Olympics - set to take place over July and August - will contribute 0.3 percentage points thanks to the sale of tickets and TV rights and more tourism, it added.
The effect would be similar to the one which the London 2012 Olympics had on the British economy, INSEE economist Dorian Roucher said.
Nevertheless, the overall impact is seen as more modest than many had hoped as spiralling travel and accommodation costs, political instability in France and security concerns discourage many sports fans.
Flight bookings are expected to rise 10% year-on-year during the summer, according to flight ticketing data firm ForwardKeys.
Yet Paris - similar to other popular tourist cities - is already crowded and expensive, and most Olympics tourists simply end up taking the place of other traditional tourists, who delay or cancel their trips.
As the effect of the Paris Olympics wanes later on, the French economy is likely to contract by 0.1% in the fourth quarter compared to the third quarter, said INSEE.
As a result, the annual gross domestic product growth would come in at 1.1% this year, the same rate as in 2023, INSEE said in a Tuesday report headlined "On GDP, Games and uncertainties".
The political situation in the country following the Sunday election that yielded a hung parliament will generate instability that may derail its forecasts, INSEE warned.
INSEE said the French economy will benefit from household consumption, which should also get a lift from the Olympics, although investment will experience no growth in the second half of the year as interest rates remain relatively high.
Inflation will keep on falling during the rest of the year to reach 1.9% in December from 2.1% in June, the report said.