France: Briefing sheet

Content Type
Country Data and Maps
Economist Intelligence Unit
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Politics, Summary, Outlook, Briefing sheet
Political Geography

Political and economic outlook

  • The French economy is the second largest in the EU (after Germany), and the seventh largest globally. It is highly developed and services-oriented, with aeronautics and luxury goods areas of expertise. Recent labour market reforms have improved competitiveness.
  • La République en marche, the party of the president, Emmanuel Macron, has a solid majority with centrist allies in parliament. The Economist Intelligence Unit expects Mr Macron to be re-elected in 2022, but a smaller majority will complicate policymaking.
  • The policy focus is on implementing a EUR100bn supply-side recovery plan to support French businesses and contain unemployment. This is a slower approach than boosting demand, but will help to improve the business environment over the medium term.
  • France will be among the fastest-growing major economies in 2021, after a deep recession in 2020. However, economic activity will remain subdued in the first half as restrictions continue and vaccinations begin slowly. Real GDP will return to its 2019 level in 2022.
  • The European Central Bank (ECB) has deployed a stimulus package to provide liquidity to the economy, which includes a EUR1.85trn pandemic emergency purchase programme, equivalent to over 10% of euro zone GDP. This will keep financing costs down.
  • The fiscal response to the crisis has led to a sharp expansion in public debt. France's debt/GDP ratio is the third-largest in the euro zone (after Greece and Italy). Fiscal consolidation will be difficult, but ultra-low interest rates will minimise financial risks.
Key indicators
  2020a 2021b 2022b 2023b 2024b 2025b
Real GDP growth (%) -8.3 5.3 3.6 2.6 1.7 1.6
Consumer price inflation (av; %) 0.5 1.1 1.3 1.6 1.7 1.7
Government balance (% of GDP) -10.9c -7.5 -5.3 -4.0 -3.3 -2.7
Current-account balance (% of GDP) -2.4c -1.7 -1.4 -1.3 -1.2 -1.0
Money market rate (av; %) -0.4 -0.5 -0.5 -0.4 -0.4 -0.4
Unemployment rate (%) 7.8 9.6 9.2 8.5 7.9 7.2
Exchange rate US$:€ (av) 1.14 1.21 1.19 1.15 1.17 1.22
a Actual. b Economist Intelligence Unit forecasts. c Economist Intelligence Unit estimates.

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Key changes since February 9th

  • A rise in coronavirus cases since mid-February has led to weekend lockdowns in Nice and Dunkirk, and 20 (out of 101) regional departments are now under close government surveillance. The more contagious UK variant comprises half of all new cases.
  • At the G5 Sahel summit, held on February 15th-16th, the president confirmed that French troop numbers in Mali, Chad, Burkina Faso and Niger under Operation Barkhane would remain at 5,100. However, we now expect an exit strategy to be unveiled later in 2021.
  • Consumer prices jumped by 0.9% month on month in January, on the back of a rise in energy and tobacco prices, and in line with an uptick across Europe (especially in Germany). We have revised up our annual forecast from 0.8% to 1.1% in response.

The month ahead

  • March 6th-Partial lockdowns could be imposed: The 20 regional departments under government scrutiny all have more than 250 new cases per 100,000 people, new variants at over 50% of cases and hospitals coming under pressure. Local authorities are considering introducing partial lockdown measures similar to those in Nice and Dunkirk.
  • March-Reform progress slowing: Progress on the legislative agenda is slowing as the window narrows to implement reforms before the 2022 election campaign season begins. We do however expect progress on the so-called 4D reform, championed by the prime minister, Jean Castex, which aims to decentralise greater powers to local authorities.

Major risks to our forecast

Scenarios, Q4 2020 Probability Impact Intensity
Social unrest resurges with protests against the government Very high Moderate 15
The labour market struggles to recover from the coronavirus crisis High Moderate 12
Business fears surge over the presidential prospects of the far-right leader, Marine Le Pen Moderate High 12
Islamist terrorists succeed in staging another high-profile attack in France Very High Low 10
The government takes radical measures to prevent foreign takeovers Very High Low 10
Note. Scenarios and scores are taken from our Risk Briefing product. Risk scenarios are potential developments that might substantially change the business operating environment over the coming two years. Risk intensity is a product of probability and impact, on a 25-point scale.
Source: The Economist Intelligence Unit.

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