France – 2020-2021 Scenario: In 2020, growth will continue to rely on domestic demand

France – 2020-2021 Scenario
  • Summary
  • Pension reform bill
  • Recent trends in activity
  • Our scenario for 2020-2021

In summary

Growth is likely to slow to 1.3% in 2019, in line with its potential, after 1.7% in 2018. In 2020 and 2021, the pace of growth is expected to remain similar, at 1.2% and 1.3% respectively, per our initial estimates. In 2020, growth will therefore continue to rely mainly on domestic demand. Especially, income gains (primarily owing to the reduced tax burden on households) and subdued inflation will support household consumption. The social unrest that has arisen due to pension reform represents a downside risk in our forecasts for Q1 2020 but does not affect the year-long scenario.

France – 2020-2021 Scenario

Corporate investment is projected to slow in 2020 after having been particularly strong in 2019. Non-financial corporate investment picked up in Q2 and Q3 2019, and is expected to grow by 4.0% in 2019 after 3.9% in 2018. The business climate remains at high levels, particularly in services, and financing conditions will remain very favourable in the years ahead. Nonetheless, business leaders are less optimistic about their investments for 2020, particularly with the end of the CICE “double benefit”.

Pierre BENADJAOUD, Economiste