In France, growth is expected to remain moderate, as investment is projected to pick up only gradually and net exports to remain a drag on growth. After three years of weak activity, GDP growth improved to 1.1 % in 2015, supported by favourable external factors. In particular, growth benefited from reduced oil prices, the euro’s depreciation and policy measures to reduce the cost of labour and strengthen competitiveness. France’s economy is expected to gradually further accelerate, driven by private consumption on the back of a dynamic households’ purchasing power. However, France’s growth rate remains below the euro-area average. In recent years, GDP growth has been held back by investment. The recovery in investment is expected to only take hold in 2017, as policy measures to reduce the cost of labour and strengthen competitiveness are expected to foster business confidence with a lag. Inflation has fallen to 0.1 % in 2015 and is expected to increase only moderately to 0.6 % in 2016. Moreover, the slowdown in emerging markets and the recent financial market turmoil might weigh on the economic outlook.
France is experiencing excessive macroeconomic imbalances. Large public debt coupled with deteriorated productivity growth and competitiveness may imply risks looking forward, with cross-border relevance. Public debt keeps increasing and recent developments do not point to a clear upswing in competitiveness and productivity. Although profit margins have increased, no recovery in investment is projected before 2017. Policy measures were taken to reduce the labour tax wedge and policy commitments have recently been stepped up. However, effective structural reform implementation remains essential, including regarding the wage setting system, regulatory impediments to firms' growth, while the ambition of the spending review needs to be stepped up.
Read a complete analysis of France's economy in the country report 2016 [2 MB]
2015 recommendations in brief
The Commission has made six country-specific recommendations to France to help it improve its economic performance. These are in the areas of: public finances; local authorities' public finances and pensions; labour market and wage-setting; SMEs; taxation; labour market and working time.