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Market Overview: France

In the thirty-year period leading up to the mid-1970s, France achieved unprecedented levels of economic growth. Affectionately referred to as “trente glorieuses” (thirty years of glory), this post-war period of prosperity and social change, saw the French economy shift from a rural-based primary sector to urban-led manufacturing and service industries.

While the country has remained principally strong in economic terms since this time, in recent years, France has seen growth stagnate amid fiscal challenges.

However, while not immune to the global financial crisis – falling into recession in 2008 and again in 2012 – France was able to weather the storm better than other industrialised nations.

Today it is the fifth largest economy in the world. Services account for over 70% of GDP but France is also one of the global leaders in manufacturing in the automotive, aerospace and railway sectors.[1]

If, as the Financial Times suggests, the “euphoric Eurozone” has become the surprise economic story of 2017, France has contributed to this recovery.[2]

Following setbacks for Eurosceptic parties in Austria and The Netherlands, Emmanuel Macron’s election as President of France in May signified a further retreat from 2016’s protectionist undertones.

While Macron’s popularity has seemingly declined since, temporarily or otherwise, some positive signs have emerged from the French economy during the first half of the year.

As it revised down forecasts for the U.S. and UK, the IMF revised up its forecast for France to 1.5%.[3]

Unemployment hit a five-year low in May[4] and GDP grew by 0.5% in the second quarter, representing the fourth consecutive quarter of growth[5]. Buoyed by a resurgence in world trade, French exports jumped 3.1% in Q2.

But while there have been some encouraging indicators in 2017, France remains far from the economic powerhouse it once was.

Economic growth remains sluggish and lagging behind many of its peers. It remains an expensive place to live and do business and in 2015, the country’s ratio of tax revenue to GDP reached 47.9% – the highest in the Eurozone.[6]

Due to a heavy tax and regulatory environment, according to the World Bank, France’s ranking in relation to ease of doing businesses dropped to 29 in 2017.[7]

Taxation and government red tape are in great need of reform if the economy is to provide an environment that fosters business and consumer confidence.

Still, with potential or existing political uncertainty in Germany, the U.S. and the UK – the country’s top three export destinations by value – there could be further issues ahead.

Although some economic gauges have signalled an uptick in performance over recent months, typical hallmarks of the French economy, coupled with potential issues arising from the changing geopolitical landscape may still thwart France’s return to economic glory.

Richard Carter, Chief Executive Officer, Bibby Financial Services Europe and Asia

[1] http://www.focus-economics.com/countries/france
[2] https://www.ft.com/content/8db37b0a-46be-11e7-8519-9f94ee97d996
[3] https://www.imf.org/en/Publications/WEO/Issues/2017/07/07/world-economic-outlook-update-july-2017
[4] http://www.marketwatch.com/story/french-unemployment-rate-falls-to-5-year-low-2017-05-18
[5] https://tradingeconomics.com/france/gdp-growth
[6] http://ec.europa.eu/eurostat/statistics-explained/index.php/Tax_revenue_statistics#Tax_revenue-to-GDP_ratio:_France.2C_Denmark_and_Belgium_show_the_highest_ratios
[7]http://www.doingbusiness.org/data/exploreeconomies/france
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