new economy

　　

【European Times, December 18th, Xia Ying, Translated】According to the forecast of the French National Institute of Statistics and Economic Studies (INSEE), the French GDP is expected to grow at a rate of 0.3% per quarter in the first half of 2026. This growth rate has not been reached since 2010. Investment is supporting this growth momentum, but consumption remains weak and the employment situation is becoming increasingly tense.

People are pessimistic and consumers are strained

According to a report by Le Monde, the growth rate for the entire year of 2026 is expected to exceed 1%. This is undoubtedly better than the predicted growth rate of 0.9% for 2025, with the growth rate in the fourth quarter being 0.2%.

"Despite the unclear political situation, France has joined the European economic recovery," said Dorian Roucher, the head of the Economic Situation Department of INSEE, and Clément Bortoli, the head of the Economic Situation Comprehensive Department. They compared it and emphasized that "the actual situation of the French economy contrasts sharply with the pessimism of the people."

This contradictory sentiment can be attributed to the unclear political situation, the lack of certainty in the budget, and the persistent "multiple crises" that the country is deeply involved in. This sentiment is first reflected in household consumption behavior. Consumption has been sluggish for the past 12 months and is expected to only show a slight rebound in 2026. The quarterly growth rate in the first two quarters was approximately 0.3%, and there are no indications that savings will significantly decrease in 2026, especially in terms of purchasing power.

After the catch-up period of fighting inflation in 2024 and the slowdown in growth in 2025, the growth rate of purchasing power in 2026 will be lower than the growth rate of economic activities. By mid-year, this increase is expected to be 0.4%, or zero growth when calculated per consumption unit (considering factors such as family size and structure), far below the expected 1% economic growth level for the same period.

In fact, investment income significantly increased household income in 2023 and 2024, but due to the decline in interest rates, investment income is decreasing, while taxes are increasing, especially for high-income individuals. The savings rate will continue to hover around the peak, reaching 18% by the middle of 2026.

The driving force comes from enterprises and the housing market.

Under such circumstances, the driving force of the French economy is expected to come from enterprises. After 18 months of political and budgetary uncertainty, enterprises have finally begun to adjust and move forward. As evidence, the business environment, which had been below the long-term average since the dissolution of the National Assembly, is now recovering. Enterprises' confidence in orders is more optimistic than it was a few months ago and they are starting to reinvest, especially in the service sector.

Another driving force comes from households: After hitting rock bottom, the purchase volume of new houses (mainly single-family homes) has begun to recover. The favorable impact of falling interest rates is once again at play. Finally, it is expected that foreign trade will also make a positive contribution to economic growth, mainly due to weak imports rather than strong exports.

Overall, private demand from enterprises (and to a lesser extent from households) will replace public demand, and public demand is expected to slow down. Under particularly tight budgets, public investment is expected to remain stable in 2026, as the expected growth in spending in the defense sector will be offset by the traditional slowdown brought about by municipal elections, which usually freeze projects for one or two years.

However, the economic recovery will not bring job opportunities. After suffering losses from 2020 to 2024, enterprises are striving to rebuild productivity and recruitment is very limited. The budget cuts for the apprenticeship program implemented in February will result in a reduction of 5,000 job vacancies in each of the first two quarters of this year. At the same time, due to the shortage of funds, the recruitment speed of the public sector is also very slow. Therefore, it is expected that the unemployment rate will slightly rise to 7.8% by the middle of 2026, while the unemployment rate at the end of 2025 was 7.5% (Editor: Yingying)