The Paris 2024 Olympic Games have come to an end after two weeks of putting the French capital and France as a whole in the world’s spotlight. However, the sports break made some forget that political parties still negotiate the appointment of a new government while the economy is not in an ideal condition.
In this article, you will read some of the latest updates coming from the French economy that you may find useful for building your trading strategies related to French origin financial instruments.
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Olympics Boost French Tourism Revenue But Uncertainty Remains
The French Minister of Tourism, Olivia Grégoire, told La Tribute Dimanche reporters that the increased number of visitors coming to France to watch the games and increased spending in recreational activities may have benefitted the country’s economy. Gregoire stressed that spending on hotels in cities hosting the Olympic events surged by 16% compared with the previous year, while sales at museums and restaurants saw a 25% increase on an annualised basis.
A report by Euronews mentioned that the Banque De France forecasts a GDP growth rate of between 0.35% and 0.45% for the third quarter of 2024, slightly higher than the rates recorded in the first half of the year. The INSEE, the country’s national statistics institute, seems to agree with the central bank’s forecast. Despite the optimism by the Bank of France, one of its chief economists, Olivier Garnier, said that “it’s still too early to see how this uncertainty will impact hiring and investment decisions.”
OECD Forecasts Modest Economic Recovery For France
The OECD’s France 2024 Economic Survey, published in July 2024, said that “disinflation and a mild improvement in the global economic outlook will support a modest recovery (Table 1). In 2024, subdued external demand will limit exports while higher financing costs will continue to reduce private investment and consumption. In 2025, easing inflation and a moderate recovery in foreign demand will allow growth to gain some momentum. Unemployment is expected to increase slightly between 2023 and 2025.”
OECD’s economists focus on putting debt on a sustainable path that requires a wide array of structural reforms. The report suggests that financial conditions in France can improve if the government manages to reduce public debt which should be a priority and requires implementing a short and medium-term fiscal consolidation plan, adding that “public spending should be lowered.”
What’s Happening In The French Market?
The French stock market is down as a result of prolonged political uncertainty. The benchmark CAC 40 has been down roughly 10% since the EU legislative elections in early June, while the Euro Stoxx 600 index has fallen 5% during the same period.
Concerns about future political transitions and their impact on state finances have affected the French banking industry especially hard, forcing the sector’s shares to trade lower.
International Monetary Fund’s (IMF) analysts suggest that the French economy could expand 0.9% this year and 1.3% next year. The IMF report said that “despite a recovery slowdown in 2023, the French economy has remained relatively resilient in the face of financial tightening and weaker euro area external demand. Inflation continued to decline since its peak in early 2023, despite some volatility from the unwinding of the energy support measures and delayed wage adjustments.”
ING Suggests France Losing Economic Momentum
In a report released in mid-July, ING economists noted that policy uncertainty may have been hurting France’s economic momentum. “The French economy hasn’t particularly disappointed, especially considering the 0.2% QoQ GDP growth in the first quarter. But we think we’ve lost some momentum in the second. Business confidence has deteriorated slightly in recent months in both the manufacturing and services sectors. Indeed, it seems that hopes of strong tourist demand linked to the Olympic Games have not materialised,” they wrote in their note to investors.
The Dutch bank’s analysts suggested that uncertainty due to the political situation could provoke a wait-and-see approach by people involved in the French stock market, creating a potential slowdown.
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.
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