In 2019, French economic growth should exceed that of Germany!
This year, the French economy is expected to grow faster than that of Germany, according to the forecasts of major business institutes. This has not happened since 2005 (not to mention the 2009 recession in which Germany experienced a larger contraction in its economy than France). The Organization for Economic Cooperation and Development (OECD) is banking on GDP growth up 1.3% in France, against "only" 0.7% in Germany. Thursday, March 14th, the Banque de France has established a growth forecast of 1.4% for 2019. The same day, the Munich institute Ifo lowered its growth forecast from 1.1% to 0.6% for the German economy…
Why could the German model suffer more than the French model? At issue: uncertainties related to trade tensions and weaker global demand, due to the slowdown in China. In addition, production in the automotive sector suffered from the introduction of new anti-pollution standards in September 2018. However, exports account for almost half of German GDP, compared to 30% of French GDP. The highly exporting German model will therefore be more affected by the slowdown in global demand than the more domestic French model.
This is a forecast but the forecast gap between the two countries is so large that there is almost no doubt that growth will be down significantly this year in Germany and that France should move ahead of Germany. However, the flexibility of the German model and the considerable room for fiscal manoeuvre should enable them to revive their economy using a massive fiscal stimulus.
Julien Moussavi, Head of Economic Research
Source: Beyond Ratings