No Growth for Three Consecutive Quarters as Fitch Downgrades Outlook
Data from the French National Institute of Statistics and Economic Studies show the economy contracted 0.2% in the first quarter this year, posted zero growth in the second quarter, and contracted another 0.1% in the third quarter. Among EU member states, only France and Lithuania posted negative growth over the past three months. Former Banque de France chief economist Janiai believes the current situation is not yet a recession, but stagnation. International credit rating agency Fitch recently downgraded France's economic outlook from stable to negative, citing deterioration in a number of economic indicators since its August assessment this year.
Inflation Rises to 3.4% as Purchasing Power Crisis Worsens
Driven by higher fuel prices, the inflation rate accelerated in October, reaching 3.4%. Dor, research director for economics at France's IESEG School of Management, said it is experiencing a very serious purchasing power crisis that will be difficult to escape in the short term. There is also pressure from borrowing rates. Economist Beisenjie expects that if interest rates continue to rise, true austerity will be implemented, and severe measures will eventually have to be accepted.
Budget Targets Under Pressure, Reforms Difficult Before Election
French Minister for Public Accounts Aimil had told the National Assembly that more efforts must be made in the 2027 budget to cope with a further slowdown in economic activity. The French government initially expected to save 44 billion euros, about NT$1.6 trillion, but the Ministry of Economy and Finance later lowered its economic growth forecast from 0.7 to 0.5, implying the fiscal deficit could widen further, and even 0.5% economic growth seems increasingly difficult to achieve. Beisenjie believes that with only six months to go until the 2027 presidential election and no majority in parliament, the government cannot launch major reforms, the situation will not change significantly before the election, and it may take until May or June next year, with everything depending on the election results at that time and the plans adopted.
Unrest Hits Tourism as Investment Stuck in Cycle
Dor noted that social unrest has made businesses more pessimistic, and one of France's strengths, services exports, namely tourism, is being hit, with bookings not doing well. Foreign channels constantly broadcasting images of social unrest constitutes negative publicity, which is a hurdle. Slowing economic growth combined with future political and tax uncertainties is prompting investors to delay investment plans, slower growth means less investment, and less investment leads to further slowing growth, and it is not yet known how France will break out of this vicious cycle. Beisenjie said the main hope lies in the resolution of the Middle East conflict and a return to normal oil and gas prices, if the conflict ends, oil and gas prices will fall within weeks, inflation will then decline and purchasing power will rise, but there is currently no sign of that.