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In the aftermath of Emmanuel Macron’s victory, what is the state of France’s economic health?


The outlook for global growth has darkened in recent weeks, with the war in Ukraine and its cascading consequences on energy and food prices, causing some to fear the advent of a new global crisis.

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And yet, in France, many economic indicators continue to show almost insolent health, with in particular a historically low unemployment rate and job prospects that remain high. Again on Friday April 22, the PMI index measuring private sector activity in France recovered to 57.5 in April, its highest level since January 2018.

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Maneuvering with Headwinds

So what should we conclude? And in what economic situation Emmanuel Macron, elected for a second term, will he have to govern? “What is certain is that we will have to maneuver with headwinds, between on the one hand fundamentals which are good, thanks essentially to the whatever the cost strategy, and on the other a pile of uncertainties that accumulate, with the war in Ukraine and the return of confinements in China”, says Sylvain Bersinger, economist at the firm Asterès.

→ EXPLANATION. The return of inflation, a challenge for economic policies

Quite surprisingly, the exit from the crisis has indeed been more dynamic than expected in France, with growth reaching 7% in 2021, one of the highest levels in the euro zone, and unemployment at its highest. low level for ten years (7.4% at the end of 2021). Proof that the improvement persists, hirings remained very high in the first quarter of 2022, above their pre-crisis level. Moreover, recruitment difficulties remain among the greatest concerns for companies, which is a sign of still dynamic activity,” says Sylvain Bersinger.

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Many uncertainties linked to the return of inflation

Still, these good figures are to be analyzed in the light of the new deal imposed by the war in Ukraine. In addition to the geopolitical uncertainties linked to the conflict, inflation, which had already started to rise again in the aftermath of the pandemic, is accelerating all over the world. In France, it was partially contained by the tariff shield put in place for electricity and gas, but it still reached 4.5% in March, and should remain at high levels for several months, which risks penalizing household consumption, and ultimately growth.

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Over the first two months of the year, consumption has already begun to slow down, with a decline expected over the first quarter by INSEE. And this despite the surplus savings accumulated during the crisis.

For the time being, it is likely that companies, which emerged from the crisis with high cash and margins, have managed to contain the rise in prices. But in the long term, they will have to pass on to prices the increase in their production costs, which already reached 20% over one year before the war in Ukraine”, explains Sylvain Bersinger. This is all the more so as the supply difficulties following the end of the crisis have worsened in recent weeks, with the Ukrainian conflict and the return of confinements in China.

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What explain in any case the significant deterioration of the latest business surveys conducted by INSEE. The latter show widespread concern, both on the part of households and businesses, but we cannot say that they are totally catastrophic. The business climate, for example, fell in March, but remains above its long-term average,” specifies Julien Pouget, head of the business cycle department of INSEE. In March, the institute estimated that the war would have an impact of one point of GDP on growth in 2022. For its part, the IMF evaluated this drop at 0.6 point of GDP for France in 2022.

A scary public debt

Beyond these disputes over forecasts, it is certain that the return of inflation will have the effect of constraining the budgetary environment of the future government. Because if, initially, the state of public finances improves with inflation, thanks in particular to a surplus of VAT receipts, in a second phase the rise in prices leads the central banks to raise their rates, this which increases the cost of debt.

On Friday April 22, Christine Lagarde, the President of the ECB, also warned that there was “high probability” that rates be raised by the end of the year if inflation remains high. In this environment, France is advancing with a serious handicap. At the end of 2021, its public debt amounted to almost 113% of GDP (2,813 billion euros), compared to 67% twenty years ago. Undoubtedly one of the greatest challenges of the new President of the Republic.

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