Resilient Economy Exposed to Political Paralysis
Despite the political uncertainty, France’s economy remains resilient with real GDP growth better than expected in Q2 2024, underpinning our revised forecast of 1.0% growth this year, up from of 0.8%, and in line with the 1.1% in 2023. Buoyant private consumption amid lower inflation and improving real incomes is supporting growth.
Moreover, France benefits from highly liquid debt markets, a favourable public debt profile, and safe-haven inflows of investors’ “flight to quality” during times of crisis. Still, despite these credit strengths, progress on supply-side reforms and spending cuts are needed to ensure government debt returns to a firm downward trajectory from the 110.6% of GDP level in 2023.
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Thomas Gillet is a Director in Sovereign and Public Sector ratings at Scope Ratings GmbH, and primary analyst on France’s sovereign credit rating. Brian Marly, a senior analyst at Scope, contributed to drafting this comment.
