OECD upgrades ’24, ’25 growth forecasts for France

France’s GDP growth is expected to soften to 0.7 per cent in 2024, before rebounding to 1.3 per cent in 2025, as per the Organisation for Economic Cooperation and Development‘s (OECD) Economic Outlook on Thursday.

This is due to tighter financing conditions impacting domestic demand, but disinflation is set to boost consumption. Despite a slowdown in employment growth and a rise in unemployment to 7.4 per cent in February 2024, export growth is expected to strengthen gradually.

This marks an upward revision OECD’s Interim Economic Outlook issued in February, in which the Paris-based organisation predicted the French economy to grow by 0.6 per cent in 2024 and by 1.2 per cent in 2025.

The government has announced spending cuts of €10 billion (0.4 per cent of GDP) in early 2024, with additional savings of €10 billion announced in April. Despite these measures, the budget deficit is projected to remain at 4.4 per cent of GDP in 2025.

Public debt is expected to reach 115.6 per cent of GDP in 2025, necessitating further fiscal consolidation.

In the face of these challenges, the government is focusing on improving early education, promoting green energy alternatives, and renovating housing.

However, external factors such as geopolitical tensions and a slowdown in the housing market pose risks. On the upside, a faster decrease in the household savings ratio could boost consumption, and a recovery in transport equipment exports could be stronger than projected.