Resilient But Strained : The State Of The French Economy

In spite of the uncertainties weighing on the global context, the French economy surprises with its ability to maintain a precarious balance. While the expected zero growth for the end of the year could have foreshadowed dark days, several indicators suggest unexpected resilience. However, this picture is neither black nor rosy, according to the words of the Governor of the Banque de France, François Villeroy de Galhau.

An economy escaping recession but under pressure

The French economy manages to avoid recession with a projected annual growth between 0.8 % and 1.1 % in 2024, according to forecasts by Insee and the Banque de France. These figures, although somewhat muted, testify to a certain stability in a European context marked by prolonged recessions, particularly in Germany. Thus, as emphasized by Christopher Dembik, economist at Pictet Asset Management, this relative performance is explained by an economy more oriented towards its domestic market, making it less vulnerable to external shocks. He clarifies that “the reduced weight of industry in French GDP, often perceived as a weakness, plays here the role of a buffer against the competitiveness crisis suffered by the European industry.”

However, this resilience is far from homogeneous. While sectors like aerospace and agri-food are experiencing a rebound in activity, others, such as manufacturing, are struggling to recover. Factory closures, notably those announced by Michelin, and job cuts at Auchan, illustrate the difficulties of transformation to adapt to new market dynamics. Nevertheless, François Villeroy de Galhau tempers these observations and asserts that “industry, overall, has relatively resisted well,” according to surveys by the Banque de France for October.

Consumption and employment : pillars under pressure

Household consumption remains a key point of the resistance of the French economy. Supported by a projected increase in purchasing power of 1.3 % in 2024, this pillar remains stable despite inflationary tensions. Moreover, according to Insee, this rise is explained by the improvement of real wages, with an increase of 0.9 % in average income per capita. In contrast, the labor market reflects a more complex situation: 17,700 net job losses were recorded in the third quarter, and the unemployment rate could reach 8 % by the end of 2025. Christopher Dembik reminds us that “current adjustments reflect a return to normal after years of massive support for companies during the pandemic.”

In terms of outlook, the political climate and budget discussions weigh heavily on the economic future. The 2025 budget, with its projected tax increases, could slow growth by several tenths of a point. Additionally, political tensions, amplified by geopolitical uncertainties and the specter of a trade war with the United States under the Trump administration, feed investors’ concerns. As Éric Dor, director of economic studies at IESEG, explains, “if a political blockage persists, markets could eventually react, thus amplifying economic risks.”

The French economy is at a decisive turning point. While the current resilience allows for the avoidance of an immediate crisis, it cannot mask the need to clean up public finances and to undertake structural reforms to meet the challenges of tomorrow. However, current signals call for increased vigilance, as budget debates and geopolitical developments will be crucial to maintaining market confidence and supporting sustainable growth. The future hinges on a delicate equation: preserve resilience and anticipate upheavals.