Economic activity in France is expected to decelerate strongly in 2025, to 0.6%, held back by fiscal adjustment and trade-related uncertainty. GDP growth is then projected to pick up to 1.3% in 2026, as investment recovers and higher real wages support a further expansion in private consumption. Inflation is projected to fall below 1% in 2025, on the back of falling energy prices. The government deficit is forecast to decline to 5.6% in 2025 and to edge up to 5.7% of GDP in 2026. Public debt is set to increase to 118.4% of GDP by 2026, from 113% in 2023, as the primary deficit remains sizeable.
| Indicators | 2024 | 2025 | 2026 |
|---|---|---|---|
| GDP growth (%, yoy) | 1,2 | 0,6 | 1,3 |
| Inflation (%, yoy) | 2,3 | 0,9 | 1,2 |
| Unemployment (%) | 7,4 | 7,9 | 7,8 |
| General government balance (% of GDP) | -5,8 | -5,6 | -5,7 |
| Gross public debt (% of GDP) | 113,0 | 116,0 | 118,4 |
| Current account balance (% of GDP) | -0,9 | -0,6 | -0,6 |
International uncertainties to weigh on demand in 2025-26
Real GDP is expected to grow by 0.6% in 2025, held back by a contractionary fiscal stance coupled with economic and policy uncertainty, both domestic and from the global environment. Net exports would detract 0.3 percentage points from GDP growth in 2025, while private investment is projected to be subdued, as the surge in uncertainty weighs on capital expenditure. Private consumption is expected to be bolstered by increases in real wages, but the saving rate should remain high, against the background of stagnant consumer confidence.
In 2026, economic activity is projected to gain momentum, bringing real GDP growth to 1.3%, on the back of declining credit cost and a slightly expansionary fiscal stance at unchanged policies. Private consumption is expected to continue driving GDP growth thanks to further increases in real incomes while private investment is set to rebound on the back of monetary policy easing and increased orders in the military industry.
Labour market to soften
The labour market cooled down in the second half of 2024. The unemployment rate hovered around 7.3% until 2024-Q4, close to its lowest level since 2008, while the activity rate slightly decreased to 74.4%, but remains 1.6 pps. above its 2019-Q4 level. Employment is expected to decline by 0.2% in 2025, before bouncing back in 2026 (+0.5%). Subdued employment growth is also due to less supportive labour market policies, particularly those regarding apprenticeship schemes. As economic output rises faster than employment, productivity is set to pick up. The unemployment rate is expected to increase to 7.9% in 2025 and to decline only marginally in 2026.
Inflation expected to fall below 1% on the back of a sharp fall in energy prices
Inflation fell to 0.8% in April 2025, from 0.9% in March and 1.8% in January, largely thanks to the decrease in regulated electricity prices in February. Inflation is expected to remain broadly stable in 2025, due to the recent fall in energy commodity prices. Energy prices are projected to fall by 5.0% in 2025. Consumer price inflation is expected to ease to 0.9% in 2025 (after 2.3% in 2024) before picking up slightly to 1.2% in 2026.
Government deficits to remain large and public debt on the rise
The general government deficit increased to 5.8% of GDP in 2024, from 5.4% in 2023. Although 0.4 pps. of GDP lower than projected in autumn, the 2024 deficit outturn represents a significant slippage compared to the deficit planned in the budget law of 30 December 2023 (4.4% of GDP). The increase in the deficit was due to tax revenues rising well below economic activity, mainly because of shortfalls in corporate income and stamp duty taxes, the indexation of social benefits (pensions) to high inflation in 2023 and high public consumption and investment growth by local governments. These deficit-increasing factors were only partially offset by the withdrawal of most energy-related measures and by additional expenditure saving measures of 0.3% of GDP adopted in February 2024. In turn, interest payments on public debt increased by 0.2% of GDP.
The budget law for 2025 that was eventually adopted in February incorporates sizeable fiscal adjustment measures aimed at curbing the dynamics of public spending and collecting extra revenues. This forecast factors in revenue-increasing measures of around 0.5% of GDP and expenditure-decreasing measures, mainly on public consumption and social transfers, worth almost 0.3% of GDP. The economic deceleration forecast for 2025 is set to weigh on tax revenues, which are expected to again rise slightly below economic activity, while higher unemployment is set to lift unemployment benefit expenditure. Interest payments on government debt are projected to rise further by 0.3 pps, to 2.5% of GDP, pushed by the higher debt and higher interest rates on new bond issuances. The revenue ratio is projected to increase by almost ¾% of GDP, while the expenditure ratio is expected to rise by some ½ pps. All in all, the general government deficit in 2025 is forecast at 5.6% of GDP.
For 2026, the general government deficit is expected to creep up to 5.7% of GDP, as some revenue measures adopted for 2025 are set to expire. The revenue-to-GDP ratio is thus projected to decline by around 0.2 pps., while the expenditure ratio is set to remain broadly stable, with interest payments expected to keep rising to 2.9% of GDP.
After edging up to 113% of GDP in 2024, the government debt ratio is estimated to maintain an upward trend, increasing to 116.0% in 2025 and to 118.4% in 2026. The increases are set to be mainly driven by high primary deficits and rising interest payments, whereas the debt-reducing effect stemming from nominal growth is projected to moderate compared to recent years.