France – 2024-2025 Scenario: modest growth against the backdrop of an orange alert on public finances

Despite a slight slowdown, economic activity continued to grow in France in Q2 2024, up 0.2% after 0.3% in Q1. The mid-year carry-over effect on growth thus stood at 0.9% for 2024. 

Third-quarter growth is expected to be strong, boosted by the Olympic and Paralympic Games, ahead of a negative backlash in the fourth quarter. Growth for full-year 2024 will come out at 1.1%, stable compared with the previous year. Growth would be driven primarily by foreign trade and public spending, with private domestic demand (excluding stocks) expected to stagnate.  Inflation should fall to an annual average of 2% as measured by the consumer price index (CPI), after 4.9% in 2023. Growth is expected to decline slightly in 2025, to 1%. Growth would then be supported in particular by the increase in household consumption generated by disinflation, with CPI inflation expected to decline to 1.1% on an annual average. Economic activity should also be fuelled by the rebound in private investment owing to the delayed effect of the decrease in key interest rates and structural needs stemming from the digital and ecological transitions. However, foreign trade is not expected to contribute to growth in 2025. Growth would also be adversely impacted by fiscal efforts as public administrations spend slightly less and slow down their investment. The public deficit is expected to reach 6.1% of GDP in 2024 before falling back to 5.5% of GDP in 2025.