France: Macroeconomic Country Outlook
- According to GlobalData, the country’s economic growth is forecast to slow down to 2.7% in 2022, due to the impact of Ukraine crisis.
- France ranked 24th out of 152 nations in the GlobalData Country Risk Index (GCRI) Q2 2022.
- Industrial production and retail trade grew by 0.1% and 9.2% on an annual basis in March 2022.
France boasts of a highly diversified and open economy. The government has undertaken several measures to increase the country’s attractiveness to foreign investment and economic competitiveness. Despite the ongoing global disruptions, FDI expanded by 32% in 2021 and created 45,008 new jobs. The country created total number of 813 projects, which created 16,347 new jobs. Expansion of projects in France stood at 756 (23,111 new jobs), and takeover of business project was recorded at 38, which produced 5,550 new job opportunities in the country.
Key findings
- Recovery and Resilience Facility: In January 2022, the European Commission approved EUR7.4 billion ($8.8 billion) of grants under the Recovery and Resilience Facility (RRF). The plan includes the following areas: housing, mobility, unemployment insurance, skills, and health, as well as France's audit and control system through investments in the fields of energy renovation of buildings, decarbonization of industry, clean vehicles, research, youth employment, and education. The plan would also introduce up to 157,000 additional jobs in France by 2026. The facility allocated EUR4.6 billion ($5.4 billion) economic and social resilience with measures to foster jobs and training for young people. The regulation will be completed by August 2026.
- France’s stance on Russia’s invasion of Ukraine: France announced to stand with Ukraine and commit to adopt sanctions against Russia with the other EU Member States. In May 2022, France released EUR100 million ($118.3 million) to finance the most urgent essential humanitarian supplies, such as medication, respirators, tents and blankets. The French development agency granted EUR300 million ($354.9 million) of state-guaranteed loan to Ukraine. On May 5, 2022, French President Emmanuel Macron announced to offer $2 billion aid for Ukraine. Additionally, France also provided 800 tons of humanitarian and medical goods to Ukraine.
- France was ranked 32nd out of 190 countries in World Bank’s doing business ranking in 2020: It takes only four days to start a business in France, well below the OECD high income average of 9.2 days. The cost (percentage of income per capita) to start a business is 0.7%, well below the OECD high income average of 3.0%. Dealing with construction permits requires nine procedures as compared to 12.7 procedures in OECD high income average nations. The country was ranked first and 16th in the parameter of trading across borders and enforcing contracts parameters, respectively.
- France has advanced R&D sector: France’s expenditure on R&D is one of the highest among the euro area countries. According to the European Commission, France’s R&D spending — which was 2.4% of GDP in 2020 — is healthy when compared to other developed countries in the euro area. The French R&D and innovation space comprises institutes such as the Ministry of Higher Education and Research, Ministry of Industry, and Ministry of Defense with overlapping objectives. In March 2020, the French President pledged to spend EUR5bn ($5.6 billion) over 10 years on COVID-19 research and developing mechanisms against future pandemics. In April 2022, Swiss silicon nitride photonic integrated circuits (PICs) company LIGENTEC SA opened a new R&D center in France.
- Robust innovation index: According to the World Intellectual Property Organization, Global Innovation Index (2021), the country was ranked 11th among 132 economies. The country also secured 11th rank among the 51 high-income group economies and eighth among the 39 economies in Europe. France stood at 10th rank on innovation outputs, the position is higher than both 2020 and 2019. Moreover, in 2021, the country performed well and secured rank on various indicators, which include trade, diversification, and market scale (eighth), software spending, % GDP (ninth), high-tech exports, % total trade and ICT use (10th). The country’s overall rank (11th) is 2021 is also higher than the rank in 2019 (16th) and 2020 (12th).
- France approved climate law: In July 2021, the country approved a law on climate change, which aims to create a ban on incentives and quotas on transportation, housing and consumption that are meant to lower greenhouse gas emissions and cut waste. The law seeks to improve energy efficiency and reduce carbon emissions in day-to-day life. The legislation introduced various changes, which include (i) ban on single-use food packaging made of polystyrene (ii) domestic flights for journeys that can be made by train in less than 2.5 hours are banned, unless they connect to an international flight. Moreover, the law would also create low-emission zones in urban areas with over 150,000 inhabitants by 2025 by limiting the circulation of certain polluting vehicles.
Key fundamentals
Sectoral outlook
- Revival for France’s tourism industry: In November 2021, the Government of France introduced a 10-year plan with a budget of EUR1.91 billion ($2.3 billion) to boost the tourism sector, which will establish France’s position as the world’s leading tourist destination and regain first place in terms of tourism revenue by 2030. According to the World Economic Forum, Travel and Tourism Index (2021), travel and tourism contributed 6.5% to GDP and the sector created 2.6 million jobs, which is equivalent to 9% of total jobs. According to GlobalData, international tourist arrival to the country stood at 112.2 million in 2021 and is forecast to rise to 195.7 million in 2022 and 198.6 million in 2023. Moreover, according to the WTTC, Economic Impact Report (May 2022), Travel & Tourism sector in the country is projected to create more than 385,000 jobs over the next 10 years, averaging over 38,000 new jobs every year.
- Development and implementation of renewable energy sector in France: In May 2022, French electricity grid operator, Enedis announced to make an investment of EUR1.7 billion ($2 billion) for more than 11,465 km (7,124 miles) of new renewable distribution lines and related power transformation equipment over the period of 2022–24. The European Investment Bank signed a loan agreement of EUR800 million ($946.3 million) to support investments by French electricity grid operator Enedis for more decentralized renewables generation and electric vehicle charging stations. The project is expected to account for 55% of France’s final energy consumption by 2050. In June 2022, an Italy-based company announced to build a 19.8-MW wind farm in France. In 2021, the government announced to invest EUR2 billion ($2.4 billion) on hydrogen until 2022 as a part of France recovery plan and the amount is expected to increase to EUR5.7 billion ($6.7 billion) by 2030.
- Positive outlook for retail sector over next year: As economic growth is expected to rebound in 2022, the household consumption expenditure is also expected to expand at a rate of 4.6%, according to GlobalData. Over the next two years (2023–24), the household consumption expenditure is expected to grow at an annual average rate of 2.3% as the economic recovery strengthens. The rising real household consumption expenditure is likely to boost the retail sector. E-commerce is also expected to grow, due to the expansion of mobile/internet penetration.
GlobalData Country Risk Index (GCRI) – Q2 2022
France ranked 24th out of 152 nations in the GCRI Q2 2022. The country’s score is in the very low risk nations band (below 30). France‘s overall risk score (26.5) is higher than the West Europe (26.1), but lower than the world average (44) in GCRI Q2 2022. The country’s risk score for macroeconomic risk and legal environment risk is lower than averages of the West Europe and world. France has a stable political and economic environment and continues to be an attractive FDI destination.
GCRI Methodology
GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies based on historical developments in an economy.
The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources, and also proprietary data from GlobalData. Western European countries in this publication include Austria, Belgium, Denmark, Finland, France, The UK, Greece, Italy, the Netherlands, Norway, Portugal, Ireland, Spain, Sweden, the UK, Luxembourg, Iceland, and Switzerland.
About the report
GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.
More details: Macroeconomic Outlook Report: France
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