France: Economic and Political Overview

Economic Overview

France is ranked as the world’s seventh largest economic power, just behind the United Kingdom and India (WEF, 2022). After suffering one of the sharpest economic contractions among EU countries in 2020 (-8%) due to the COVID-19 pandemic, France’s economy recovered strongly in 2021 (+6.8%). However, Russia’s invasion of Ukraine and the subsequent energy crisis dampened the recovery by reducing consumers’ purchasing power, denting confidence, and exacerbating supply-side difficulties (IMF). Economic growth slowed down to 2.5% in 2022, and according to IMF forecasts, it should further decrease to 0.7% in 2023 before strengthening to 1.6% in 2024.

In 2022, after a strong economic recovery from the COVID-19 pandemic in 2021, France’s economy was hit by an energy crisis driven by Russia’s invasion of Ukraine. Despite its reliance on nuclear energy and low dependence on Russian gas, France faced a sharp slowdown in economic activity and high inflation. A strong policy response was put in place to tackle the crisis, equivalent to over 2% GDP, and including gas and electricity price freezes, cash transfers to households, a fuel price rebate, and support for enterprises (IMF). Budget deficit decreased from -5.1% GDP in 2021 to -4.5% GDP in 2022, but it is expected to remain high in 2023 (-4.8% GDP) before decreasing in 2024 (-4.3%) thanks to fiscal consolidation measures (IMF). Public debt, which is one of the highest in the Eurozone, slightly decreased from 112.6% GDP in 2021 to 111.8% GDP in 2022. However, it is expected to rise again in 2023 (112.5% GDP) and 2024 (113.5% GDP). Driven by supply chain bottlenecks and the energy price shock, inflation soared from 2.1% in 2021 to 5.8% in 2022, but remained well below the EU average, largely due to energy price controls and subsidies (IMF). It is expected to remain high in 2023 (4.6%) before declining to 2.4% in 2024 (IMF). The priorities for 2023 include tackling inflation and protecting households, minimising the rise in unemployment, accelerating ecological transition and supporting healthcare and education. The France 2030 plan aims at boosting critical innovation and investment. In addition to the risk posed by new strains of the COVID-19 virus and waning vaccine effectiveness, France faces structural challenges: high structural unemployment, weak competitiveness, and high public and private debt burdens. High unemployment rates, especially among youth, remain a growing concern for policymakers.

Unemployment rate, which peaked at 8% in 2020, declined to 7.5% in 2022 and is expected to remain around that level in 2023 (7.6%) and 2024 (7.5%) (IMF). The deployment of short-time work scheme limited large-scale employment losses but continued efforts to boost worker skills and address inefficiencies in the educational system will be key (IMF). Social mobility remains low and the employment rates of many disadvantaged groups are poor.

Main Sectors of Industry

France is the largest agricultural power in the European Union, accounting for one-fourth of the EU’s total agricultural production. Nevertheless, the agricultural sector only represents a very small part of the country's GDP (1.6%) and employs 3% of the population (World Bank). French agricultural activities receive significant subsidies, especially from the European Union. Wheat, corn, meats and wine are France's main agricultural products.

France's manufacturing industry is highly diversified; however, the country is currently undergoing a de-industrialisation process, which has resulted in the outsourcing of many activities. Industry represents 16.7% of GDP and employs a fifth of the active workforce (World Bank). The key industrial sectors in France are telecommunications, electronics, automobile, aerospace and weapons.

The tertiary sector represents 70.3% of the French GDP and employs 77% of the active workforce (World Bank). France is the leading tourist destination in the world with a record of 66.6 million foreign visitors in 2022 (GlobalData). The discovery of the cultural and gastronomic heritage of France and shopping are the main activities popular with foreign tourists.
In 2022, due to the war in Ukraine, most businesses faced a surge in production costs, in addition to the pre-existing pandemic-related supply difficulties (Coface). Despite this challenging environment, the tourism sector rebounded strongly, with international revenues worth almost EUR 57 billion in 2022 (Atout France).

Source: World Bank, Latest data available.

Indicator of Economic Freedom

Score:

65,7/100

World Rank:

64

Regional Rank:

34

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

Business environment ranking

Score:

7.74/10

World Rank:

15/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

Sources of General Economic Information

Ministries

Ministry of the Economy,  Ministry of Action and Public Accounts
Ministry of Agriculture and Agribusiness

Statistical Office

French Institute of Statistics (INSEE)

Central Bank

The European Central Bank
The Bank of France

Stock Exchange

Euronext

Other Useful Resources

Documentation Centre for Economy-Finance

Main Online Newspapers

Le Monde (only in French)
Le Figaro (only in French)
Challenges (in French and English)
Libération (only in French)
Les Echos (only in French)
La Tribune (only in French)

Political Outline

Current Political Leaders

President : Emmanuel Macron (since 14 May 2017; re-elected for a second term on 24 April 2022)
Prime Minister: Élisabeth Borne (since 16 May 2022)

Next Election Dates

Presidential elections: April 2027
Senate: September 2023
National Assembly: June 2027

Current Political Context

As the polls predicted, the 2022 presidential elections resulted in a duel between President Emmanuel Macron (La République En Marche, centre-liberal party) and Marine Le Pen (Rassemblement National, far right), amid failed attempts to unify the left. In April 2022, Macron was re-elected for an additional 5-year term, but abstention reached a 50 year record, and Le Pen managed to gather 41.46% of the votes. As Macron’s Ensemble! (Together) coalition lost its parliamentary majority at the legislative election in June, policymaking has become more challenging, with bills likely to be passed by decree. The biggest policy challenge is the program to reform the pension system (abolition of special regimes), that previously triggered a large-scale national strike and could lead to social unrest.

On the international scene, Russia’s invasion of Ukraine dominated current affairs. Macron multiplied diplomatic efforts to find a resolution to the conflict and plead for peace during talks with Russian President Vladimir. In November 2022 on the sidelines of the G20 meetings, he met with Chinese President Xi Jinping, and the two sides reaffirmed their opposition to the use of nuclear weapons in Ukraine. In December, U.S. President Joe Biden invited Macron at a State Dinner, demonstrating his unity with France and NATO members against Moscow's invasion. This visit was also an opportunity for Macron to raise the issue of Biden's Inflation Reduction Act, a USD 430 billion bill that offers massive subsidies for U.S.-made products. The war lead to a global food and energy crisis and supporting purchasing power is a priority. In August, the French government approved a EUR 20 billion package of measures to help households cope with inflation.

Main Political Parties

- The Socialist Party (PS): centre-left
- The Republicans: centre-right
- En Marche: centre, new liberal political movement founded by Emmanuel Macron
- National Rally (RN): far-right; first parliamentary representation in 1997 and gaining support amid growing voter scepticism towards the EU
- The Democratic Movement (MoDem): centrist
- Europe Ecology - The Greens (EELV): emphasises ecology and peaceful and sustainable lifestyles
- La France Insoumise (Unbowed France) (FI): far-left
- French Communist Party (PCF): communism, soft euro-scepticism

Type of State

France is a Republic, parliamentary democracy combined with presidential power.

Executive Power

The President of the Republic is the Head of State. He/She is elected by direct universal suffrage for five years. He/She appoints the Prime Minister and his/her Government at the suggestion of the Prime Minister. The Prime Minister sets the amount of the State's expenses and revenue, and prepares some bills.

Legislative Power

The parliament is composed of the Senate and the National Assembly. The 348 senators are elected by indirect universal suffrage for nine years, renewable by a one-third majority vote every three years. The 577 deputies (MPs) are elected by direct universal suffrage. They examine bills and private bills successively, vote laws and monitor the Government. The economic, social and environmental council has an advisory function (optional or compulsory) within the framework of the legislative process.

Indicator of Freedom of the Press

World Rank:

34/180

Indicator of Political Freedom

Ranking:

Free

Political Freedom:

1/7

Civil Liberties:

2/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

COVID-19 Country Response

Travel restrictions

Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.

Import & export restrictions

A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

The summary of the EU’s economic response to the COVID-19 pandemic is available on the website of the European Council.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) undertaken by the French government, please consult the section dedicated to France in the IMF’s Policy Tracker platform.

Support plan for businesses

For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.