The French economy ends 2024 with a 0.1% GDP contraction in the fourth quarter, alongside a budget deficit reaching 6% of GDP.
Weakened Economy and Political Uncertainties
The French economy is stagnating at the end of 2024, with a GDP contraction of 0.1% in the last quarter after a 0.4% growth in the third quarter. This coincides with the end of the Paris 2024 Olympics, which temporarily boosted economic activity. Household consumption is slowing, and investments, both by businesses and households, have decreased by 0.3%. The business community is concerned, citing excessive taxation encouraging companies to invest abroad.
Financial Situation and Budget Deficit
The financial situation of France is becoming increasingly tense, with a budget deficit reaching 6% of GDP. The new Prime Minister, François Bayrou, aims to reduce the deficit to 5.4% of GDP by 2025. However, international investors' confidence is waning, with French bond rates surpassing those of Spain and Portugal.
Outlook and Future Challenges
The outlook for 2025 remains bleak, with an expected growth of only 0.5%. The Bayrou government must find a balance between deficit reduction and economic support to prevent further deterioration, particularly in the labor market.
France's economy faces challenges requiring a balanced strategy between deficit reduction and economic growth support.
