Globaltraded.com , Paris — In the latest economic forecast, France is set to chart a path of moderate growth amidst fiscal challenges and inflationary pressures over the next few years. Here’s a snapshot of the economic prospects for one of Europe’s leading economies:
Moderate Growth Amidst Fiscal Challenges:
France’s economic activity is poised for moderate growth in the coming years, with GDP expected to slowly increase over the forecast horizon. Despite facing a public deficit projected at 4.8% of GDP in 2023, measures are underway to stabilize fiscal health, with a decline to 4.3% expected by 2025. Public debt, a critical economic indicator, is projected to decline to 109.6% of GDP in 2023 before a slight uptick to 110% in 2025.
Driving Forces Behind Economic Dynamics:
The real GDP is anticipated to grow moderately at 1.0% in 2023, with net exports initially propelling growth. However, domestic demand took center stage in 2023-Q2, becoming the primary driver. In 2024, private consumption is expected to spearhead GDP growth, compensating for subdued investment due to monetary policy restrictions.
By 2025, the economy is projected to grow by 1.4%, driven by lower inflation and looser financial conditions. Domestic demand is expected to lead the way, while net exports make no significant contribution.
Labor Market and Inflationary Trends:
The labor market in France remained dynamic in 2023, stabilizing the unemployment rate at 7.2% in Q2, a level close to its lowest since 2008. Employment growth is anticipated to moderate, with a forecasted unemployment rate of 7.5% in 2025. Inflation, after peaking in early 2023, is expected to gradually subside, standing at 2.0% in 2025.
Government Measures and Fiscal Outlook:
The general government deficit is expected to remain stable at 4.8% of GDP in 2023. As measures related to the COVID-19 pandemic are phased out, the fiscal landscape is poised for a decline to 4.3% by 2025. Public debt, having reached 109.6% of GDP in 2023, is projected to stabilize in 2024 before a modest increase to 110% in 2025.
While interest payments on public debt are set to decrease slightly in 2023, reaching 1.7% of GDP, they are expected to rise to around 2.0% by 2024. An extension of the decrease in the domestic tax on final electricity consumption (TICFE) is forecasted to contribute to a net budgetary cost of 0.3% of GDP in 2025.
France’s economic trajectory presents a nuanced landscape, with policymakers navigating the challenges of fiscal consolidation, inflation moderation, and sustained growth. The coming years will require adept management to balance these factors, ensuring the resilience and adaptability of the French economy in the face of evolving global and domestic conditions.
