Bruno Le Maire, the French Minister of Economy and Finance, presented the stability program at the National Assembly on April 9, 2024. He expressed optimism about a potential return of economic growth, citing “signs of recovery.” The Ministry of Economy confirmed a growth projection of 1% for 2024 and 1.4% for 2025. However, the French Economic Observatory (OFCE) published more cautious perspectives on April 10, revising its growth forecast downwards. Initially estimated at 0.8% in October 2023, the growth rate for France is now projected to be only 0.5% for the current year due to budget cuts announced by the government to reduce the deficit below 5%.
The OFCE calculated that the 10 billion euros in budget reductions planned for 2024 will result in a 0.2% reduction in growth. With an additional 10 billion euros in savings sought by Bercy, the impact on economic activity is expected to be even greater. By 2025, with a total of 20 billion euros in budget cuts and the removal of all tariff protections, the impact on growth is estimated to be 0.6%. Despite the expected positive effects of lower interest rates, the OFCE projects a growth rate of 1.2%, lower than Bercy’s forecast of 1.4%. The reduction in government spending is anticipated to have a significant impact on economic growth in the coming years.
The first quarter of 2024 saw a modest increase of only 0.1% in GDP, with a forecast of 0.2% for the second quarter. The third quarter may see a slight boost from the “Olympic effect,” leading to a 0.3% increase in GDP. However, this growth is expected to taper off in the fall, ending the year with a modest 0.1% growth rate. The prospects for a strong economic recovery appear distant, as the OFCE economists see limited potential for short or medium-term growth, with the exception of the positive contribution from foreign trade.
The OFCE notes that the trade balance has been improving since 2023, particularly in industries such as aerospace and transportation equipment. Despite the challenges faced by the French economy in achieving sustainable growth, there are positive developments in certain sectors that are contributing to overall economic expansion. However, the reliance on external factors such as exports highlights the need for a comprehensive economic strategy that addresses both domestic and international challenges. As France navigates the complexities of fiscal policy and economic stability, finding a balance between budgetary discipline and sustainable growth remains a key priority for policymakers.
