Country Report France December 2008

Outlook for 2009-10

• The president, Nicolas Sarkozy, has committed his government to taking all necessary steps to restore stability to the banking system.
• The government's short-term priorities will be to alleviate the impact of an economic slowdown through measures to support business investment, employment and the incomes of unemployed and low-paid workers.
• Mr Sarkozy will also seek to maintain momentum behind his programme of structural reforms, but faces a far more difficult economic and political environment during the second parliamentary year of his presidency.
• The budget deficit is expected to rise to 5% of GDP during the outlook period as a result of below-trend growth. However, France should avoid facing any financial penalties under the EU's Stability and Growth Pact.
• The French economy is forecast to contract in 2009, for the first time since 1993. Real GDP is forecast to decline by 1.2% in 2009, with a modest recovery to 0.4% in 2010.
• France will post large trade deficits in 2008-09, but these will be partly offset by surpluses on the services and investment income accounts.

Monthly review

• Mr Sarkozy's approval ratings have shown signs of reviving following his efforts to manage the fall-out of the financial crisis.
• Martine Aubry narrowly beat Segolene Royal to become the new secretary general of the opposition Parti socialiste (PS) in November, following a bitter campaign that focused more on personalities than on policy.
• Ms Royal's promise to remain a "transformative force" within the PS suggests the battle for the soul of the party has not ended with the leadership election.
• On December 4th Mr Sarkozy unveiled plans for a fiscal stimulus for the French economy worth roughly 26.4bn (around 1.3% of GDP).
• The plan aims to support corporate liquidity, to alleviate the impact of the economic downturn for the worst-affected business sectors and to speed up planned public investment.
• The overall impact of the proposals on economic growth will be positive, but could be limited in 2009 as a result of weak economic confidence and difficulties associated with launching investment projects.
• The business confidence index recorded its sharpest ever fall in October. A two-year decline in the rate of unemployment ended in the third quarter. France's trade deficit widened to a record level in October as exports plunged.

Source: Country Report

This report covers the following industry codes:
SIC Code: 37;15
NAICS Code: 336;23