France is a leading member of the World Trade Organization (WTO) and the Organization for Economic Cooperation and Development (OECD). Its economy is the second largest in the European Union, following Germany.
However, France had massive economic challenges in 2022, sparking a high unemployment rate exacerbated by the COVID-19 pandemic, increased market competition, and a sluggish economy, not to mention Russia ceasing supplying energy.
Youth unemployment has a deleterious impact on the nation’s youth, precluding them from developing the professional experience and accumulation of wealth expected to propel the economy for future decades. The unemployment rate rose rapidly, and economic destitution became common across France.
According to Banque de France, France has had a current account deficit over the past decade. For instance, in 2018, the deficit was about €15, 1 billion. Additionally, France pays exorbitant prices for energy, which puts enormous strain on its fragile economy. The current gas prices, which are five to ten times higher than they were two years ago, are dwindling French industrial output. In contrast, French politicians seem unable to develop effective and viable remedies to protect the country’s domestic and international industries.
Today, prices are continuing to surge rapidly in France. According to the preliminary assessments, the annual growth rate climbed to 5.8% in June, up from 5.2% in May.
Amid the ongoing catastrophic conflict in Ukraine and the dramatic rise of fuel, electricity, and food products, prices remain somewhat competitive; they have soared by 33% to 5.7% during the last year. Moreover, inflation has dreadfully hampered the nation’s stumbling economy, with service prices rising by 3.2% in May.
In a futile attempt to assuage the fear of citizens embroiled in a grim economic situation, in an interview with “Les Echos,” Minister for the Economy and Finances Bruno Le Maire claimed: “We hope that the inflation peak will start to decline in mid-2023.”
After laying out support measures worth €25 billion to alleviate the devastating impact of inflation, the government recently unveiled the contents of its “purchasing power package”: A 4% increase in pensions and social minimums and a 3.5% increase in index points for state employees. Sylvain Bersinger, a renowned economist, points out: “A substantial growth in wages, in turn, increases inflation and the public deficit.”
Bersinger argues that Macron’s administration should prioritise low-income households above everything else in the midst of this “precarious crisis.”
According to former Economy and Finance Minister Bruno Le Maire, everyone must join in the fight against inflation, which means that businesses can—and they already do—contribute through value-sharing mechanisms, partnerships, or profit-sharing.
Instead of taking responsibility for the current dismal financial turmoil, Le Maire, who seems still devoted to Macron’s economic policies, blamed the French rather than admitting responsibility for the present disappointing financial turmoil, saying that while the government has already earmarked €25 billion to energy security, “it can’t all be on government’s shoulders.”
The director of the Banque de France, François Villeroy de Galhau, considered the improvement of the country’s economic conditions, including the reduction of social restrictions after the pandemic and the return of tourists to France, among the features of enhancing the rate of economic recuperation. Yet, investors will probably have to wait for a positive spin-off before seeing any signs of a turnaround.
The details in the report provided by the Banque de France in recent months have been unequivocally influenced by global conditions, including the war in Ukraine and variations in production lines between France and China regarding health restrictions.
Le Figaro viewed the Banque de France report to suggest that agricultural and chemical production would have been severely harmed if the crisis had also harmed the country’s automotive industry. According to Le Figaro, 65% of agricultural and chemical industries have suffered setbacks, a 5% decrease from the previous month. Also, Le Figaro quoted French industrialists saying they have to raise their selling prices steadily in response to constant pressure on commodity expenses.
The National Institute of Statistics and Economic Studies (Institut National de la Statistique et des Études Économiques, “INSEE”) had earlier projected a growth rate of merely 0.25% for the second quarter, much to the despair of the French citizens. Following the GDP recession recorded in the first quarter, this number reflects a sharp fall in the country’s GDP following the slight improvement of the outbreak compared to the previous year.
On the other hand, according to figures released by the Banque de France from over 8,500 businesses in April, financial transactions were generally modest in the industries and service sectors.
In conclusion, many eminent economists prognosticate severe storm clouds looming on the financial horizon that could devastate the future of France