Time for a reckoning : 2024-2025 Outlook for the French economy

French growth is expected to reach an annual average of 0.5% in 2024. This downward revision of our growth forecast from 0.8% in October 2023 is due mainly to weaker than expected growth for 2024 (ultimately -0.15 GDP point lower for 2024 than previously forecast) and a new 10 billion euro fiscal adjustment program, whose impact on GDP is estimated at -0.2 GDP point in 2024. In 2025, French growth is forecast at 1.2%, despite the positive effects of lower interest rates (0.2 GDP point). But growth will be constrained by the government's planned new fiscal adjustments of 20 billion euros in 2025 (whose impact on GDP is estimated at -0.6%), as well as by the total abolition of tariff shields. Inflation should fall in 2024 (2.4% after 4.9% in 2023) and be close to the 2% target in 2025. The downturn in the labor market is continuing, due to weak growth in activity and the partial recovery of past productivity losses, which will push the unemployment rate to 8.2% by the end of 2024 and 8.1% by the end of 2025 (excluding the effect of the RSA benefits reform). The saving rate should remain high in 2024, but fall in 2025, supporting consumption despite sluggish purchasing power in 2025 after the rebound in 2024 (0.2%, after 1% in 2024 per consumption unit). Due to a sharp shrinkage in certain tax bases (real estate, corporate profits, etc.), the public deficit reached 5.5% of GDP in 2023, 0.6 point higher than forecast in the Finance Act for 2024. With the expiry of the exceptional budget support measures and the expected further structural adjustments of 1 GDP point over two years, the public deficit should fall to 5% of GDP in 2024 and 4.4% in 2025, despite higher interest charges and the deterioration in the cyclical deficit. After three years of decline, public debt (in points of GDP) is set to rise again in 2024 and 2025, due to lower nominal growth and lower inflation. It should reach 112.8% of GDP in 2025, after 111.9% in 2024 and 110.6% in 2023.