Economic Overview
France is ranked as the world’s seventh largest economic power, just behind the United Kingdom and India (WEF, 2022). After suffering one of the sharpest economic contractions among EU countries in 2020 (-8%) due to the COVID-19 pandemic, France’s economy recovered strongly in 2021 (+6.8%). However, Russia’s invasion of Ukraine and the subsequent energy crisis dampened the recovery by reducing consumers’ purchasing power, denting confidence, and exacerbating supply-side difficulties (IMF). Economic growth slowed down to 2.5% in 2022, and according to IMF forecasts, it should further decrease to 0.7% in 2023 before strengthening to 1.6% in 2024.
In 2022, after a strong economic recovery from the COVID-19 pandemic in 2021, France’s economy was hit by an energy crisis driven by Russia’s invasion of Ukraine. Despite its reliance on nuclear energy and low dependence on Russian gas, France faced a sharp slowdown in economic activity and high inflation. A strong policy response was put in place to tackle the crisis, equivalent to over 2% GDP, and including gas and electricity price freezes, cash transfers to households, a fuel price rebate, and support for enterprises (IMF). Budget deficit decreased from -5.1% GDP in 2021 to -4.5% GDP in 2022, but it is expected to remain high in 2023 (-4.8% GDP) before decreasing in 2024 (-4.3%) thanks to fiscal consolidation measures (IMF). Public debt, which is one of the highest in the Eurozone, slightly decreased from 112.6% GDP in 2021 to 111.8% GDP in 2022. However, it is expected to rise again in 2023 (112.5% GDP) and 2024 (113.5% GDP). Driven by supply chain bottlenecks and the energy price shock, inflation soared from 2.1% in 2021 to 5.8% in 2022, but remained well below the EU average, largely due to energy price controls and subsidies (IMF). It is expected to remain high in 2023 (4.6%) before declining to 2.4% in 2024 (IMF). The priorities for 2023 include tackling inflation and protecting households, minimising the rise in unemployment, accelerating ecological transition and supporting healthcare and education. The France 2030 plan aims at boosting critical innovation and investment. In addition to the risk posed by new strains of the COVID-19 virus and waning vaccine effectiveness, France faces structural challenges: high structural unemployment, weak competitiveness, and high public and private debt burdens. High unemployment rates, especially among youth, remain a growing concern for policymakers.
Unemployment rate, which peaked at 8% in 2020, declined to 7.5% in 2022 and is expected to remain around that level in 2023 (7.6%) and 2024 (7.5%) (IMF). The deployment of short-time work scheme limited large-scale employment losses but continued efforts to boost worker skills and address inefficiencies in the educational system will be key (IMF). Social mobility remains low and the employment rates of many disadvantaged groups are poor.
| Main Indicators | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
| GDP (billions USD) | 2,635.92 | 2,957.42 | 2,784.02 | 2,923.49 | 3,018.89 |
| GDP (Constant Prices, Annual % Change) | -7.9 | 6.8 | 2.6 | 0.7 | 1.3 |
| GDP per Capita (USD) | 40,385 | 45,186 | 42,409 | 44,408 | 45,729 |
| General Government Balance (in % of GDP) | -5.8 | -5.2 | -4.4 | -4.6 | -4.1 |
| General Government Gross Debt (in % of GDP) | 114.7 | 112.6 | 111.1 | 111.4 | 112.4 |
| Inflation Rate (%) | 0.5 | 2.1 | 5.9 | 5.0 | 2.5 |
| Unemployment Rate (% of the Labour Force) | 8.0 | 7.9 | 7.3 | 7.4 | 7.3 |
| Current Account (billions USD) | -47.36 | 10.61 | -47.66 | -35.82 | -21.02 |
| Current Account (in % of GDP) | -1.8 | 0.4 | -1.7 | -1.2 | -0.7 |
Source: IMF – World Economic Outlook Database , October 2021
Country Risk
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