Country Report France November 2009

Outlook for 2010-11

• The French president, Nicolas Sarkozy, will remain in office throughout the outlook period, having now served half his five-year presidency.
• Since coming to office in May 2007, Mr Sarkozy has overseen the introduction of several important reforms. The political environment is likely to be less conducive to reform during the second half of his presidency.
• Although the economy is slowly emerging from a recession, unemployment will continue to rise, prompting the centre-right government to increase spending on social programmes in a bid to limit the risk of social instability.
• Mr Sarkozy will continue to try to secure approval of some structural reforms—notably to the pension system and local government—but he will consult widely and be willing to compromise.
• Businesses will benefit from the abolition of the local income tax in 2010, although this will be partly offset by a new carbon tax. The government intends to issue a public bond to finance new strategic investment projects.
• The budget deficit is expected to rise above 9% of GDP during the outlook period as a result of the recent recession. France will avoid facing any financial penalties under the EU's Stability and Growth Pact.
• Real GDP is expected to shrink by 2.3% in 2009. Growth is likely to remain volatile from quarter to quarter, but the Economist Intelligence Unit expects a gradual recovery in real GDP growth to 1.2% in 2010 and 1.4% in 2011.

Monthly review

• France's political scene in October has been dominated by debates on the 2010 budget and the growing discontent among parliamentarians towards the government's plans for reforming local business taxes.
• Government plans to simplify the various layers of local government are also threatening to produce a backlash.
• The "Angolagate" trial ended in October. It was one of a number of legal cases involving centre-right politicians to have been in the news in recent weeks.
• The European Commission has given France until 2013 to reduce its budget deficit below 3% of GDP, but this target is unlikely to be met.
• The government's plan to scrap the local business tax in 2010 continues to arouse strong opposition in both the National Assembly (the lower house) and the Senate (the upper house).
• Real GDP expanded by 0.3% quarter on quarter in the third quarter of 2009, confirming France's exit from recession in the second quarter. Domestic demand weakened, but exports surged, helped by car scrappage schemes.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;89;70;20;48;53;37;80;2834
NAICS Code: 52;81;72;311;517;44;336;62;3254