The French economy is showing signs of resilience, as inflation continues to decline and GDP growth exceeds earlier expectations. INSEE’s provisional figures for April show a slowdown in inflation to 2.2% over one year, down from 2.3% in March and significantly lower than the 5.9% recorded in April 2023. This decline can be attributed to slowing food prices, a slight decrease in manufactured products prices, and an increase in energy prices.
Despite the positive growth, challenges persist in the French economy. The deficit increased to 5.5% of GDP in 2023, exceeding the targeted 4.9%. Efforts to reduce the deficit and bring it below 3% of GDP by 2027 are met with skepticism. While rating agencies have maintained their confidence in France’s debt repayment capacity, doubts linger about the government’s ability to meet its targets.
Plans to implement cost-saving measures to reduce the deficit could potentially disrupt the growth momentum. Experts warn that a 10 billion savings plan could already impact annual growth by 0.2 points. Concerns remain about the credibility and coherence of the deficit reduction trajectory, with some critics questioning its feasibility. Despite these challenges ahead, there is hope that France can continue on a path of sustainable growth.
In conclusion, while inflation is declining and GDP growth is positive, challenges persist in the French economy such as increasing deficits and doubts about meeting targets for reducing them through cost-saving measures may disrupt sustainable growth momentum if implemented incorrectly or unrealistically planned for implementation
