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France is one of the main recipient countries of foreign direct investment. In 2022, a total of more than $36 billion was invested in France in the form of foreign capital to create or develop a foreign subsidiary or to invest in a French company.
Despite the difficulties experienced in certain sectors of the economy, France’s economic situation is strong enough to support its welfare state model. But France is in the grip of severe internal and external crises, including inflation, rising energy prices and a housing crisis, which are weighing on the wallets of French households. One of the most important challenges facing the French economy continues to be deindustrialization and growing dependence on imports. With a negative trade balance of 100 billion euros, France is significantly worse off than its neighbors. To stop this, France is counting on the transfer of production assets to its territory: at the end of COVID, the government allocated more than 800 million euros for a relocation plan.
Economic development and foreign trade
With a GDP of nearly $2.8 trillion in 2022, France has risen to the 7th place among the richest countries in the world, ahead of Italy, Brazil and Canada. In 2020, the vast majority of companies operated in the service and trade sectors. The deindustrialization of the country has strongly affected many sectors, the means of production of which are now located in Eastern Europe or the Far East. However, certain industries remain strong in France, such as luxury, cosmetics and aviation. The latter sector provides the best international results. In 2023, the aeronautical trade balance was estimated at nearly 30 billion euros.
Overall, however, France faces a very strong imbalance in its trade balance. Germany remains its main trading partner, both in terms of imports and exports. Even in its once large surplus agricultural sector, France is importing more and more food, especially from its European partners. Since 2015, the balance of the agricultural trade balance has even become incomplete. But mostly the import of products from fossil fuels worsens the trade balance. The energy-related trade deficit amounted to EUR 100 billion in 2023. This number is constantly increasing due to the interruption of transactions with Russia, which until the war in Ukraine supplied a significant part of the oil and gas in France.
Household income and consumption
Since 2022, inflation has returned to France. Soaring energy prices on the world market fueled inflation across Europe. By January 2023, gas prices had doubled compared to 2015, and consumer goods had risen by 20%.
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Property remains expensive for many households in France. In 2022, housing accounted for 18.1% of household disposable income in France. In addition, the French are increasingly reluctant to become owners. The reason is the real estate crisis and the jump in interest rates in the Eurozone.
While there was a peak in household financial investment in 2020, the trend has been sharply declining since 2022. Savings are generally affected by the stagnation of the purchasing power of the French, between 2021 and 2022 the household savings rate in France decreased by 3 points.
Government expenditures and revenues
Like most European countries, France was built on the model of the welfare state, where the principle of solidarity and redistribution of wealth prevails, and where many forms of social involvement of the state have developed. Among the areas of intervention, we find national education as one of the main investment areas of the public finances: 80 billion euros in 2022. Social insurance is also one of the foundations of this welfare state. France provides protection related to age, sickness, unemployment and family. The social security system as a whole is in budgetary balance.
Source: fr.statista.com
