The second quarter saw faster-than-expected growth in the French economy, boosting the eurozone. Official data released Tuesday revealed this positive trend.
With deepening deficits and a growing debt, the French government has been banking on stronger growth to ease the task of balancing the books. The French economy, ranking second in the eurozone after Germany, expanded by 0.3 percent in the second quarter, exceeding the earlier estimate of 0.1 percent by INSEE, the statistics institute.
Finance Minister Bruno Le Maire hailed the “excellent performance” of the French economy. Growth figures for Germany and the broader eurozone are yet to be announced.
Spain, another strong performer in the region, experienced a 0.8 percent expansion driven by exports and robust household spending. The central bank had predicted a growth rate of 0.6 percent.
France’s GDP growth was supported by foreign trade and a rebound in corporate investment. Exports grew by 0.6 percent while imports remained steady.
The growth figure was consistent with the more optimistic estimate from the Bank of France. Domestic demand made a marginal positive contribution to growth, with consumer spending staying steady. However, consumer spending dropped by 0.5 percent in June, attributed to reduced consumption of food and energy.
– Domestic demand ‘disappointing’ –
Economist Maxime Darmet from Allianz Trade praised the headline growth figure as “surprisingly good” but expressed disappointment in the “very weak” domestic demand over three consecutive quarters. INSEE revised its first-quarter growth estimate to 0.3 percent and added 0.1 points to the fourth quarter of 2023.
France’s economic performance puts it on track to meet or exceed Finance Minister Le Maire’s forecast of 1.0 percent overall growth in 2024, according to INSEE. Le Maire emphasized the need for significant savings to meet EU deficit and debt regulations by 2027.
Despite budgetary cuts of 25 billion euros ($27 billion) planned for this year, government spending increased in the second quarter. INSEE predicted that the ongoing Olympic Games in France would boost economic growth by 0.3 percent in the third quarter.
However, the political uncertainty following the inconclusive general election could dampen this growth. The caretaker government led by Prime Minister Gabriel Attal awaits President Emmanuel Macron’s decision on a new prime minister next month.
The New Popular Front emerged as the strongest bloc in the National Assembly vote but lacks an absolute majority. The potential prime minister, Lucie Castets, stated that adhering to EU deficit and debt rules would not be her top priority.
Business confidence in France declined in July, reaching its lowest level since February 2021. The Paris stock market saw a 0.4 percent increase in morning trading following the data release.
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