Following growth of 0.8% in 2025, economic activity in France is set to grow at the same rate in 2026, weighed down by the energy shock. In 2027, at unchanged policies, economic activity is forecast to pick up slightly to 1.1%. Aeronautics and increased orders in the defence industry are set to support investment and net exports. The fallout from the conflict in the Middle East should lift inflation to 2.4% in 2026 and 1.8% in 2027. The government deficit is forecast to remain at 5.1% in 2026, before edging up to 5.7% in 2027. Public debt is set to increase to some 120% of GDP by 2027, up from 115.6% in 2025, on the back of sizeable primary deficits.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 0.8 | 0.8 | 1.1 |
| Inflation (%, yoy) | 0.9 | 2.4 | 1.8 |
| Unemployment (%) | 7.7 | 8.3 | 8.7 |
| General government balance (% of GDP) | -5.1 | -5.1 | -5.7 |
| Gross public debt (% of GDP) | 115.6 | 118.1 | 120.2 |
| Current account balance (% of GDP) | -0.2 | -0.4 | -0.2 |
Rising energy prices and fiscal adjustment weigh on demand
Real GDP is expected to grow by 0.8% in 2026, supported by strong net exports but weighed down by the fallout from the conflict in the Middle East. Net exports are forecast to contribute 0.2 percentage points to GDP growth in 2026, driven by aeronautics and defence exports. However, growth of private consumption is expected to remain subdued, dragged down by the impact of higher energy prices on real disposable incomes. The saving rate is projected to decline moderately in 2026, though remaining high at 17.6%.
In 2027, economic activity is projected to gain some momentum, with real GDP growth reaching 1.1%, on the back of declining energy prices. This improvement is supported by a slightly expansionary fiscal stance, assuming unchanged policies. Private consumption is expected to be bolstered by higher real incomes, though the saving rate is projected to slightly increase. Private investment is set to accelerate due to increased orders in the defence industry and investment in information and communication technology.
Unemployment set to increase
The labour market cooled in 2025, with the unemployment rate rising to 7.9% in 2025-Q4, marking a 0.6 pps increase over the year. The activity rate reached a new peak at 75.4% in 2025-Q4, due in particular to an increase in the activity rate of people aged 15 to 24 and 55 to 64, on the back of the 2023 pension reform. Payroll employment declined by 0.2% in 2025 and is expected to decline further by 0.4% in 2026 and 0.1% in 2027. Total employment, including self- employment, is expected to decline marginally in 2026 before rising by 0.1% in 2027 while the labour force is expected to continue growing by 0.7% in 2026 and 0.6% in 2027. Consequently, the unemployment rate is set to gradually increase to 8.3% in 2026 and 8.7% in 2027. Meanwhile, productivity is expected to accelerate as output continues to grow.
Inflation expected to increase due to higher energy and food prices
Until February 2026, inflation had remained subdued, at 1.1%, after 0.4% in January. This reflected wage moderation, intense competition in the telecoms market and only a moderate rise in energy prices since 2022. However, in March and April, energy prices surged due to the conflict in the Middle East and inflation spiked to 2.5%. Headline inflation is expected to peak at 2.9% in 2026-Q3, before gradually declining to 1.4% in 2027-Q4. On average, headline inflation is projected to reach 2.4% in 2026 and 1.8% in 2027. Core inflation is expected to rise to 1.9% in 2027.
Large primary deficits and rising interest payments to keep fuelling public debt
After reaching 5.8% of GDP in 2024, the general government deficit fell to 5.1% of GDP in 2025. This significant decline was mainly due to revenue-increasing measures of around 0.5% of GDP and expenditure-decreasing measures, mainly on public consumption and social transfers, worth almost 0.3% of GDP, as well as tax revenues growing faster than nominal GDP. This dynamism of revenues mainly stemmed from indirect and corporate taxes. However, interest payments on government debt rose further, by 0.2 pps. to 2.2% of GDP, driven by higher debt levels and higher interest rates on new bond issuances.
For 2026, the general government deficit is expected to remain at 5.1% of GDP. Both the revenue-to-GDP ratio and the expenditure ratio are projected to rise slightly, by 0.2 pp. Revenue-increasing measures amounting to 0.5% of GDP include, among others, the extension of the exceptional contribution by large enterprises, the top-up tax on high revenues and the increase of the Generalised Social Contribution (CSG) on financial revenues. Excluding the impact of these measures, tax receipts are expected to grow slightly below economic activity. This forecast incorporates retrenchment efforts in expenditure endowments to the different ministries and public administrations set out in the 2026 budget and the expenditure savings announced to mitigate the fiscal cost of the conflict in the Middle East. The expected increase in interest payments, to 2.6% of GDP, is due to the uptick in interest rates on new bond issuances and to higher inflation impacting the returns of inflation-indexed bonds.
For 2027, assuming unchanged policies, the general government deficit is expected to creep up to 5.7% of GDP, as some revenue measures planned for 2026 are set to expire. The revenue-to-GDP ratio is therefore projected to decline by 0.2 pps. of GDP, whereas the expenditure ratio is set to rise by 0.4 pps., with interest payments increasing further, to 2.8% of GDP.
After rising to 115.6% of GDP in 2025, the government debt ratio is projected to remain on an upward trend over the forecast horizon, reaching 118.1% of GDP in 2026 and exceeding 120% of GDP in 2027. The projected increases in general government debt are set to be mainly driven by high primary deficits and rising interest payments, which will more than offset the debt-reducing effect of nominal growth.