Economic activity in France is set to remain resilient in 2024, supported by public expenditures and foreign trade. GDP growth is forecast to decrease in 2025 (0.8%), dragged by fiscal adjustment but supported by monetary policy easing. Activity is then expected to pick up in 2026 (1.4%), fuelled by lower funding costs and stronger private demand. Inflation is projected to decrease in 2024 and 2025, broadly stabilising at below 2%, favoured by the transmission of lower energy, commodity and food prices to core inflation. The government deficit is forecast to increase further, to 6.2% of GDP in 2024 before declining to 5.3% in 2025 and broadly stabilising in 2026. Public debt is set to increase to some 117% of GDP by 2026, from 109.9% in 2023, as the primary deficit remains sizeable.
| Indicators | 2024 | 2025 | 2026 |
|---|---|---|---|
| GDP growth (%, yoy) | 1,1 | 0,8 | 1,4 |
| Inflation (%, yoy) | 2,4 | 1,9 | 1,8 |
| Unemployment (%) | 7,4 | 7,5 | 7,6 |
| General government balance (% of GDP) | -6,2 | -5,3 | -5,4 |
| Gross public debt (% of GDP) | 112,7 | 115,3 | 117,1 |
| Current account balance (% of GDP) | -0,5 | -0,3 | -0,3 |
Domestic demand to take the lead in 2025-26
Real GDP is expected to grow by 1.1% in 2024 in annual terms. Net exports have been driving GDP growth since 2023-Q4, thanks to the momentum in transport equipment exports. Public consumption and investment are also supporting growth. Private demand remains subdued, against the background of restrictive financial conditions and a high savings rate.
In 2025, a contractionary fiscal stance is set to weigh on real GDP growth, which is expected to decline to 0.8%. Private investment is projected to remain subdued as the transmission of a more accommodative monetary policy occurs with a lag, while economic and policy uncertainty persist. Private consumption is expected to be supported by disinflation and increases in real wages.
In 2026, economic activity is projected to gain momentum, bringing real GDP growth to 1.4%, on the back of a lower fiscal adjustment and further declining credit cost. GDP growth is forecast to be driven by private domestic demand, as the saving rate is expected to moderately decline, and private investment is set to be supported by monetary policy easing.
Labour market to soften
The labour market remained dynamic in the first quarter of 2024 but slowed down in the second quarter. The unemployment rate decreased by 0.2 pp to 7.3% in 2024-Q2, close to its lowest level since 2008, while the employment rate reached a record high at 74.7%. Employment growth is set to slow down in 2025 and 2026 (+0.1% and +0.4% respectively, after +0.5% in 2024), as the effect of apprenticeship contracts on employment growth decreases, hours worked return to their 2019 levels and labour productivity bounces back. The unemployment rate is expected to gradually pick up, from 7.4% in 2024 to 7.5% and 7.6% in 2025 and 2026, respectively.
Inflation expected to stabilise below 2%
Inflation decreased gradually in 2024, to reach 1.5% in October, largely thanks to declining energy and food prices, as well as to a strong slowdown in services prices. Inflation is expected to pick up slightly in 2025 from these temporary low levels of September and October, due to base effects and increases in food prices. Growth in energy prices is projected to further moderate in 2025 (+0.8%), amid a decline in electricity prices. Inflation is expected to stand at 2.4% in 2024 on average, before easing to 1.9% in 2025 and to 1.8% in 2026, remaining below ECB target.
Large increase in government deficit in 2024
The general government deficit is expected to increase to 6.2% of GDP in 2024 (from 5.5% in 2023), almost 1 pp. of GDP more than projected in spring. The slippage is due to tax revenues rising well below economic activity and high public expenditure growth, especially of local governments. This is set to be partly offset by the withdrawal of most energy-related measures, which account for 0.2% of GDP, and by expenditure savings of 0.3% of GDP adopted in February affecting public consumption, social benefits, subsidies, current and capital transfers. Finally, interest payments on public debt are expected to increase by around 0.3% of GDP, pushed by higher rates on new issuances.
For 2025, the French government has put forward a sizeable fiscal package in its draft budget to reduce the general government deficit. This forecast factors in revenue-increasing measures amounting to almost EUR 21.6 billion (0.7% of GDP) and expenditure-decreasing measures, mainly on public consumption and social transfers, worth almost EUR 12 billion (0.4% of GDP). As these measures are expected to weigh on growth, they are also set to weigh on cyclical tax revenues in 2025. The revenue ratio is projected to increase by some ¾ points of GDP, while the expenditure ratio is expected to decline only marginally. Interest payments on government debt are set to rise further by 0.3 pps, to 2.5% of GDP. All in all, the general government deficit in 2025 is forecast at 5.3% of GDP.
For 2026, the general government deficit is expected to reach 5.4% of GDP, as some revenue measures to be adopted in 2025 are set to expire. The revenue-to-GDP ratio is thus projected to decline by around ¼ pps, while the expenditure ratio is set to decrease only marginally. Interest payments are expected to keep rising by 0.3 pps.
After declining to 109.9% of GDP in 2023, public debt is estimated to edge up, reaching 112.7% in 2024. Thereafter, public debt is set to keep increasing gradually, to reach 117.1% in 2026. The increase is expected to be mainly driven by high primary deficits and rising interest payments, whereas the debt-reducing effect stemming from nominal growth is projected be more moderate than in recent years.