Recently, the French National Institute of Statistics and Economic Studies (INSEE) released a series of economic data for the third quarter, which paints a rather sobering picture of the country's economic landscapeAlthough there was a brief glimmer of recovery, driven by events such as the upcoming Paris Olympics, the broader economic environment remains precariousThe nation is grappling with a multitude of challenges, from external turbulence to internal political and economic instability, making the outlook for the second half of the year far less optimistic.

The statistics provided indicate minimal growth; the economy expanded by only 0.4% quarter-on-quarter, despite a 0.3 percentage point boost attributed to the OlympicsThe continuation of subdued consumer confidence and investment has led analysts to predict a concerning decline of 0.1% for the fourth quarter, coupled with a projected annual growth rate of just 1.1% for 2024, mirroring last year's performance

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Notably, external trade fared better than domestic consumption, with sectors like aviation and shipbuilding demonstrating resiliencePublic expenditure, particularly from local governments, has become the sole driving force of domestic demandOfficials at INSEE remarked that after a brief economic uptick in 2023, business investment has slowed considerably, especially following political upheavalsFirms are adopting a wait-and-see approach, suggesting that commercial investment is expected to remain lackluster due to rising credit costs, weak Eurozone demand, and domestic political uncertainties.

Supporting these findings, the French central bank released its macroeconomic forecast, echoing INSEE's sentiments and predicting slight recoveries for 2025 and 2026, with growth rates of 1.2% and 1.5%, respectivelyAccording to the bank, the easing of inflation will restore household purchasing power, alongside positive factors like rising real wages, which should shift consumption back into the lead as the primary engine of economic growth, surpassing trade

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The central bank forecasts that inflation, which peaked at 5.7% in 2023, will drop to 2.5% in 2024 and stabilize between 1.5% and 1.7% in 2025 and 2026, aligning with the European Central Bank's targetHowever, central bank governor François Villeroy de Galhau noted that while the economy is likely to persist at a growth rate just above 1%, tangible signs of a steady recovery have yet to emerge, with both households and businesses displaying a reluctance to invest, largely due to the prevailing instability of the political climate and international environments.

In light of these persistent economic challenges, members of the French economic community are urging the government to revitalize growth through three fundamental tenets: sustainable public finances, stable expectations, and competitive production capabilitiesThe goal is to maneuver away from a cycle characterized by recovery, fatigue, and stagnation.

On the aspect of public finances, recent budget documents submitted to the National Assembly revealed that France's structural fiscal challenges are compounded by soaring regional expenditures and lower-than-expected national revenues

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The public deficit as a percentage of GDP could reach 5.6% in 2024, with predictions of a spike to 6.2% in 2025. Consequently, the European Union has initiated an "excessive deficit" investigation and mandated France to deliver a fiscal consolidation plan by September 20 to ensure that the public deficit remains below 3% of GDP by 2027. In response, the French government has sought an extension for submitting its plan, hoping to align it with the 2025 finance billPreviously, the government had announced a reduction of €25 billion in public spending for 2024, although only €10 billion of cuts have materialized so farFormer minister Bruno Le Maire has voiced his concerns over the grave situation of France's deteriorating fiscal state, emphasizing that spending cuts are the only prudent course of action to avert a deeper financial crisisHe proposed prioritizing wage increases, labor productivity, addressing climate change, and enhancing private financial contributions towards economic growth.

In terms of stabilizing expectations, rather than intervening externally in uncertain situations, it seems wiser for policy-makers to rebuild internal stability and reinforce economic resilience

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Recent polling by French media and the Montaigne Institute indicates that public anxiety regarding financial governance is on the rise, with approximately 80% of respondents agreeing that resolving the debt issue is urgentEconomic surveys from INSEE suggest that the government's ongoing monetary easing policies will likely yield no immediate results; despite raises in wages and social benefits and a reduction in inflation, consumer sentiment remains cautiousHousehold savings rates are elevated, consequently undermining consumption's contribution to economic growthAmidst the government’s struggles to finalize the cabinet under the new prime minister, ongoing negotiations about slashing national and local expenditures, increasing taxation on wealthy individuals and large firms, and advancing ecological transition plans are creating significant uncertainty regarding economic policy, hindering sustained and stable economic development.

When it comes to competitive production, the French industrial sector is facing numerous challenges, including dwindling overseas demand, reduced new orders, and excessive industrial capacity

The vitality and competitiveness of French manufacturing are under severe pressureAnalysis of the performance of Fortune Global 500 companies in recent years reveals a continual decline in the number of French firms on the list, which are predominantly centered in sectors like finance, insurance, and entertainmentTraditional heavy industries, electrical engineering, and nuclear sectors are surprisingly underrepresentedData shows that over two-thirds of respondents believe that inflation is adversely impacting their ability to purchase "Made in France" products, with the share of French goods in domestic consumption dropping by 11 percentage points over the past 50 years—an alarming trendAs a result, an increasing number of French consumers are exercising caution in their spending, preferring cheaper imported alternativesEconomists speculate that this pattern stems from falling domestic demand and purchasing power, aggravated by rising production costs, increased employee expenses, shrinking profit margins, and a weaker willingness to innovate and transition within French enterprises