Economic activity in France is set to decelerate to 0.7% in 2025 and to grow by +0.9% in 2026, as economic and policy uncertainty and the necessary fiscal adjustment weigh on domestic demand. Activity is expected to pick up slightly to 1.1% in 2027. Inflation is projected to gradually increase from 1.0% in 2025 to 1.3% in 2026 and 1.8% in 2027. The government deficit is forecast to decline to 5.5% and 4.9% of GDP in 2025 and 2026, respectively, before edging up to 5.3% in 2027. Public debt is set to increase to 120% of GDP by 2027, from 113.2% in 2024, on the back of sizeable primary deficits.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 0.7 | 0.9 | 1.1 |
| Inflation (%, yoy) | 1.0 | 1.3 | 1.8 |
| Unemployment (%) | 7.6 | 8.0 | 8.2 |
| General government balance (% of GDP) | -5.5 | -4.9 | -5.3 |
| Gross public debt (% of GDP) | 116.3 | 118.1 | 120.0 |
| Current account balance (% of GDP) | -0.0 | 0.6 | 0.6 |
Domestic political uncertainty and fiscal adjustment to weigh on demand in 2026-27
Real GDP is expected to grow by 0.7% in 2025, after a growth rate of 1.2% in 2024. In the first half of 2025, accumulation of inventories supported GDP growth, reflecting storage of domestic production awaiting export. Public consumption also supported growth, while private domestic demand stagnated, held back by economic and political uncertainty, both domestically and on a global level. In the third quarter, GDP growth accelerated to +0.5%, supported by net exports, due to the delivery of large transport equipment that had previously been produced and stored. This is expected to continue in the fourth quarter.
In 2026, the domestic economic and policy uncertainty is set to weigh on real GDP growth, which is expected to reach 0.9%. Net exports are expected to add 0.4 pps. to growth, while private consumption growth is set to accelerate to 0.6%, contributing 0.3 pps. to growth. Private investment is set to rebound after two years of decline, supported by lower interest rates.
In 2027, economic activity is projected to gain momentum, bringing real GDP growth to 1.1%. This uptick is supported by diminishing uncertainty and a slightly expansionary fiscal stance. Private consumption is expected to continue driving GDP growth thanks to further increases in real incomes, while private investment is set to continue expanding.
Unemployment set to increase
Overall, the labour market has remained resilient in 2025. The unemployment rate hovered around 7.5% until 2025-Q2, close to its lowest level since 2008, while the activity rate increased to 75.3% in the second quarter, 2.5 pps. above its 2019-Q4 level. However, employment declined marginally in the first half of 2025 and is expected to decline slightly by 0.1% in 2025 on average, before stabilising in 2026 and recovering in 2027, increasing by 0.2%. As employment growth moderates while labour force remains buoyant, productivity is expected to accelerate, and the unemployment rate is set to gradually increase to 8.2% in 2027.
Inflation expected to increase on the back of higher food and energy prices
Inflation increased to 1.1% in 2025-Q3, from 0.9% in 2025-Q2. This low level of inflation is largely due to the decrease in regulated electricity prices in February 2025. Inflation is expected to increase to 1.3% in 2026 on the back of higher agricultural and food prices. In 2027, despite lower services inflation, headline inflation is anticipated to increase to 1.8%, due to higher food prices and the entry into force of ETS2, if not delayed, which is expected to lift energy prices.
Large government deficits to decline, but public debt to keep rising
After recording a deficit of 5.8% of GDP in 2024, the general government deficit is expected to decline to 5.5% of GDP in 2025. The fiscal adjustment relies on 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. Accordingly, the revenue ratio is projected to increase by ¾ pps. of GDP. In turn, the expenditure ratio is expected to rise by around ½ pps. as higher unemployment is set to lift unemployment benefit expenditure, while interest payments on government debt are projected to rise further by 0.2 pps., to 2.3% of GDP, driven by higher debt and higher interest rates on new bond issuances.
For 2026, the general government deficit is expected to decline to 4.9% of GDP, based on information included in the draft budget submitted to the national parliament in early October 2025. Revenue-increasing measures in the forecast amount to 0.6% of GDP and include, among others, the extension of the exceptional contribution by large enterprises and of the top-up tax on high revenues, as well as the non-indexation of personal income tax brackets. Expenditure-reducing measures, worth some 0.4% of GDP, include the freezing of pensions and other social benefits. The revenue-to-GDP ratio is projected to rise by some ¼ pps., while the expenditure ratio is set to shrink by ⅓ pps., with interest payments expected to keep rising to 2.5% of GDP. By the release date of this forecast, the outcome of the ongoing parliamentary discussions of the 2026 draft budget remained uncertain.
For 2027, at unchanged policies, the general government deficit is expected to creep up to 5.3% of GDP, as some revenue measures planned for 2026 are set to expire. The revenue-to-GDP ratio is projected to decline by 0.1 pps. of GDP, whereas the expenditure ratio is set to rise by 0.3 pps., with interest payments increasing further, to 2.8% of GDP.
After edging up to 113.2% of GDP in 2024, the government debt ratio is projected to keep increasing over the forecast horizon, to 120% of GDP by 2027. This increase is 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.