France: Purchasing power should “boost” GDP growth!

France - Apr 25 2019
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Weekly food for thought
  • GDP

France: Purchasing power should “boost” GDP growth!

The French GDP growth is expected to reach 1.5% in 2019 compared to 1.6% in 2018 and 2.3% in 2017 according to the latest forecasts of the Observatoire français des conjonctures économiques (OFCE). This forecast has been lowered by 0.3 percentage point compared to previous forecasts of the French organization.

This year, economic activity would “be driven by the sharp increase in purchasing power (+2.5%), supported by the socio-fiscal measures redistributing to households nearly EUR 12 billion over the year (+0.8 point of gross disposable income)”. The significant increase in real wages would also support French purses. The OFCE forecasts a 1.5% increase in 2019 after an average of 0.3% over the last two years. The average wage per capita would jump by 2.6% in 2019 against 1.6% in 2018.

While French growth is expected to be higher than the Eurozone growth as a whole (+1.3% expected in 2019) which is particularly hampered by German growth and the Italian recession, we must keep in mind that the fiscal stimulus decided to post “yellow vests” movement is only transitory and that once the announcement and one-off effects wane, French economic growth could be slowing down from next year against the background of global trade deterioration.

Julien Moussavi, Head of Economic Research
Source: Beyond Ratings, OFCE

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