REGIONAL REPORT
June and elections over the Summer of 2024 . Emmanuel Macron ’ s government lost its parliamentary majority after he called a snap election in June following historic gains made by the far right in the European elections . The minority government of Michel Barnier toppled after three months , following a vote of no confidence , and François Bayrou formed a new government in December 2024 .
Bayrou ’ s new government succeeded in pushing through a 2025 budget bill earlier this year , aimed at reducing France ’ s budget deficit , and survived a no-confidence vote over the social security budget . France has been under pressure from the European Union to reduce its huge debt and deficit , which in 2024 reached 6.1 per cent of GDP .
New parliamentary elections cannot be held before July 2025 so if the Bayrou government were to fall before then , another minority government would once again have to be formed . Political uncertainty will therefore remain high throughout the year .
François Bayrou at the Bayrou government ’ s first Council of Ministers meeting at the Elysée Palace in Paris .
Image : Shutterstock . com .
Economic outlook
According to the Banque de France ’ s latest macro-economic forecast for France , published on 19 December 2024 , its baseline scenario remains that of an exit from inflation without a recession , with a recovery delayed until 2026 and 2027 compared to its previous projections .
“ Economic activity is expected to grow by 1.1 % in 2024 , driven mainly by foreign trade . Growth should remain positive in 2025 but decline slightly . In line with the expected recovery in demand from our European partners , growth should pick up in 2026 and 2027 , essentially under the effect of lower inflation , and the loosening of monetary policy that will have taken place ,” it said .
“ In 2024 , headline inflation declined significantly and is expected to fall to an annual average of 2.4 %. Over the projection horizon , inflation should stay below 2 % for a lasting period . This slowdown in prices should be facilitated by a slowdown in food , energy and manufactured goods prices , while inflation in services should fall more slowly , accounting for a more gradual decline in core inflation towards 2 %,” it added .
Analyst ING expects the French economy to face significant
La Rochelle , France .
Visit by the French President , Emmanuel Macron , for a major speech in April 2024 on Europe at the Sorbonne .
France ’ s economy has been resilient in the face of the COVID-19 pandemic and higher inflation ( helped by government measures that have supported businesses , jobs and purchasing power ) but public debt has risen
Image : Shutterstock . com .
Image : Karim Manjra , Unsplash .
challenges in 2025 due to “ ongoing political instability , more restrictive fiscal policy and a challenging international environment .” GDP growth is projected to slow as a result .
“ From an economic perspective , France enjoyed a dynamic third quarter in 2024 , with GDP growth of 0.4 % quarter-on-quarter largely due to the Paris Olympic Games . However ,
the economic situation has since deteriorated sharply . Uncertainty over future budget adjustments , including potential tax hikes for businesses and households , along with political instability , the aftermath of the Olympics and a less favourable international environment , have weighed on fourth-quarter activity and the economic outlook ,” said the analyst .
ING projects GDP growth to be 0.6 % in 2025 , compared to 1.1 % in 2024 and 2023 . A recovery is expected in 2026 but , given the challenging international environment and restrictive French fiscal policy , it may be limited to 1 %, it added .
Geopolitical challenges
Geopolitical uncertainties remain high , as do those weighing upon international trade . The Banque de France ’ s baseline scenario does not take into account the risk of trade tensions in the event of an increase in U . S . customs duties , the effects of which are difficult to quantify .
French President , Emmanuel Macron , told CNN in a recent interview that he would not have any qualms about confronting Donald Trump head-on should the U . S . president make good on his threats to impose tariffs on Europe . He warned that tariffs would harm European economies but also the United States , given the level of economic ties . Citing “ national security ”, Trump announced recently that he intended to impose 25 % tariffs on imports of aluminium and steel , including from Europe .
EU-US trade in goods and services reached an impressive € 1.6 trillion in 2023 . This means that every day , € 4.4 billion worth of goods and services cross the Atlantic between the EU and the United States .
In 2018 , the EU hit back at tariffs on European steel ( 25 %) and aluminium ( 10 %) introduced during Trump ’ s first term as U . S . president . It then retaliated with duties on € 2.8 billion of U . S products , before a temporary truce was brokered under the Biden administration in a deal which expires at the end of March .
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