France Infrastructure Report Q1 2008

France is one of the most visited countries in the world with almost 75mn tourists each year. In terms of income derived from foreign tourism, France is ranked third. The country's economy is one of the strongest, both in Europe as well as in the world. France is also home to some of the world's leading players in the construction industry, which grew at a rate of 4.1% y-o-y in 2006. This report forecasts that the industry will grow at an average of 2.75% during 2008-12.

French construction companies have developed a very high reputation for themselves in the international market, as is evident from the large number of international contracts they have won in the past few years.

A diversified outlay of investments - roads, railways, airports and power plants - has enabled almost all the segments of French infrastructure to grow. However, it is property construction - residential and commercial - that is witnessing an uptrend after a brief slowdown, and catalysing industry growth. Major infrastructural endeavours in the country include the construction of an underground tunnel line in Toulon, a high-speed railway link between Tours and Bordeaux and a combined-cycle power plant in Bourgogne.

The French infrastructure sector, however, is plagued by a few problems. The sector is governed by stringent regulations, which act as a barrier to growth by discouraging entry of new players into the market. The tax rates in the country remain one of the highest in Europe. In addition, the budgetary deficit and unemployment levels are some of the other macro-economic factors that could impede the industry's growth.

The construction industry in France is expected to grow at a modest pace. It is forecast to reach a value of EUR284.73bn (US$477.3bn) in 2012.