France’s economy is described as sluggish when compared to the economies of other leading European Union countries like Germany and Italy. Yet, when it comes to resiliency, the French economy fares better, because it remains largely immune to the effects of global trade wars, particularly that of the trade conflicts initiated by U.S. against China.
After all, the French people, particularly those in the manufacturing sector, rely on the country’s domestic products and services; making it less exposed and vulnerable to the economic effects of China’s retaliatory actions against the U.S. tariffs. According to CNBC financial analysts, France has become a better option because unlike EU economic leader Germany, French manufacturers and retailers do not rely on Chinese goods and raw materials.
As a matter of fact, the sluggish Gross Domestic Product (GDP) growth rate of 1.4% that France saw in the past periods, has seen a notable increase of 0.3% in the third quarter of 2019. The GDP increase is actually contrary to what French economists predicted — that economic growth would slump by 0.3% in the second quarter to further decline by 0.2% by the third quarter.
Berenberg economist Florian Hense, explained this as largely due to the structure of the French economy; to which exports contribute only 31% to GDP growth. That denotes nearly 70% of France’s local services and domestic products have added to the gross value that raised France’s GDP growth rate to 1.7%.
French Government Policies that Spurred the Growth Rate
Florian Hense acknowledges President Emmanuel Macron’s pro-growth policies, through the introduction last year of a €10 billion stimulus package. The stimulus program included tax cuts applicable not only to investors but also to low-income workers and pensioners, as a means of increasing household income.
However, the 0.3% increase posted in the third quarter did not make the French economy more robust by the end of the year. The tax cuts only increased the country’s overall budget deficit by more than the projected 3% limit.
France’s GDP Growth Seen as Not Enough
Global economists sees the 0.3% GDP growth as the best that the Frenchgovernmenty can achieve in the year ahead, onwards.
President Macron’s government still has to make improvements that will address the country’s growing budget deficit, which business plan writers for startup French entrepreneurs must also keep in mind. Presumably, the French government will push for reforms such as spending cuts and other increases in business taxes, in order to arrest, if not curtail, the country’s growing budget deficit.