That’s because the economy is facing two major headwinds: trade tensions from abroad and deficit reduction at home, according to Alexandre Stott, a European economist at Goldman Sachs Research.
France’s gross domestic product (GDP) is forecast to expand by 0.5 per cent this year, compared with no growth in Germany and 0.8 per cent for the euro area as a whole.
The tariff and trade outlook remains very uncertain. Still, Stott thinks the risks are now a bit more symmetric, judging from recent communications out of the United states.
“There will also be second-round effects. Uncertainty around trade policy will remain high, global growth is likely to slow, and financial conditions are now tighter. This should not affect France more than others, but it will still be negative for the economy,” he was quoted as saying in an article by Goldman Sachs Global Institute.
Last year, the country had the largest deficit in the euro area, but signs of improvement are being seen, Scott noted. The government had been expecting a deficit of around 6 per cent of GDP, and it was 5.8 per cent. It’s not a big improvement, but it comes on the back of two years of negative surprises, so a more encouraging direction, he said.
A second sign of improvement is the government showing greater commitment to its deficit target.
The key challenge in France is a large fiscal imbalance, and progress on that is made very difficult by the fact that a political deadlock is being faced, Scott added.
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