France’s economy is expected to stagnate in the fourth quarter of 2024, according to the Bank of France’s latest survey. The report highlights rising uncertainty among businesses in the nation, which is also grappling with a political crisis following the collapse of Michel Barnier’s government.
The Bank of France’s monthly economic survey, conducted before the government fell, revealed increased uncertainty in the business environment, particularly in the industry and construction sectors. Business uncertainty has reached its highest levels since the energy crisis of 2022, fueled by domestic political turmoil, unresolved tax debates, and global economic challenges.
“The uncertainty indicator based on company comments remains relatively high in all sectors, with responses highlighting the domestic political situation and the impact of tax debates, as well as the international environment,” the report stated.
Despite the uncertainty, November saw a slight uptick in activity. However, the Bank of France has maintained its growth forecast of zero for the final quarter, a stark contrast to the 0.4% GDP growth recorded in the third quarter, which was driven by the effects of the Paris Olympic and Paralympic Games.
The report estimates that underlying economic activity, excluding the exceptional impact of the Games, would maintain a “slightly positive growth trend” of about 0.2 points of GDP. However, this gain is expected to be offset by the anticipated backlash from the Games, estimated at -0.2 points.
Adding to the uncertainty, France enters 2025 without a valid budget. This predicament will persist until President Macron appoints a new Prime Minister to form a government, following Barnier’s no-confidence vote just three months after taking office.
The Bank of France’s findings paint a challenging picture for Europe’s second-largest economy, as it balances domestic political upheaval with fragile economic growth.
