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(Bloomberg) — The French economy is heading into a sharp slowdown this winter from which it will recover only gradually, according to Bank of France forecasts that cast further doubt over the economic optimism of President Emmanuel Macron’s government. 

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Weaker demand for French exports, stronger inflation and higher interest rates than previously envisaged mean the central bank predicts growth slowing to just 0.3% in 2023 — far short of the 1% the Finance Ministry has written into the budget. It said a recession can’t be ruled out, even though it would be temporary and limited. 

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“After showing good resilience during most of 2022, activity will go through two distinct phases: a sharp slowdown from this winter, followed by an easing of inflation tensions and a gradual recovery of economic growth in 2024 and 2025,” the Bank of France said. 

The outlook comes after national statistics agency Insee said a sharp acceleration would be required in the second half of 2023 to achieve the 1% growth the government needs to meet its budget deficit goal.

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Commenting on that report Thursday, French Finance Ministry officials said the government stands by its 1% forecast as the economy is resisting pressure from energy prices and will rebound next year. 

The Bank of France said there’s a large degree of uncertainty around its forecast, notably concerning the supply of natural gas in Europe. The final outcome for 2023 could be within a range between a 0.3% contraction and a 0.8% expansion, it said.

Inflation, which has hit consumer-spending power despite government-financed energy price caps, should peak at 7.3% at the end of 2022 before declining to about 4% in the fourth quarter of 2023, according to the forecasts. Even as pressure from energy costs eases in 2024, the Bank of France expects inflation in the services sector to be sustained as wages and rents take time adjust.