The publication of the first estimation of the growth during the 4th quarter (0%) has been accompanied by too complacent remarks because this figure is not only a statistical data relating to the current economic situation. It reveals a structural weakening of the French economy and it would have been the purpose of a deeper analysis. It occurs after the same 0% estimated for the 3rd quarter. France has so known a nil growth during six months. That achievement will weight on the 2024 accounts. If growth has been in 2023 0.9%, it is thanks to an average effect and to the fact that activity has been stronger during the 2022 2nd half. Now the situation is the opposite. The acquired growth for 2024 is nil and a spectacular rebound this year would be necessary in order to the 1.4% objective included in the Finance bill will be reached.
The bad achievements in 2023 come first from the diminution of the household investments (-5%). The fall of the housing starts (- 22%) and of delivered permits (-24%) leaves us to expect an even larger investment fall in 2024. The very low consumption increase (+0.7%) shows household worries about the future and will bring their financial savings at a record level. Enterprises have continued to increase their investments (+2.8% after 3.8% in 2022) but that has not leaded to an improvement of the competitiveness and to a recovery of the foreign exchanges of manufactured goods whose deficit during these last 12 months has again been near 50 billion euro. The contribution of the foreign trade to growth has nevertheless been slightly positive thanks to the reduction of refined oil stocks and to a calendar effect on the deliveries in aeronautics and shipbuilding.
The consequences are already felt on the employment level. The unemployment rate has rebounded to 7.4% and this increase would continue due to the poor activity prospects in 2024.The number of jobseekers will remain above 3 million despite a demographic context which would have mechanically reverse this trend. Due to an ageing population, the number of retirements will increase every year when the arrivals on the job market slow. It is so few likely that the full employment objective will be reached in 2027.
The foreign trade situation remains very worrying, despite the reduction of the deficit to 100 billion these last twelve known months when it overpassed 160 billion in 2022 due to the energy prices and the dollar increases, and to the electricity imports. But without energy, the deficit remains very heavy, which well shows that no progress has been accomplished regarding enterprises competitiveness and the declarations about reindustrialization have not produced any effect.
At last, the public finances situation has continued to deteriorate and the France indebtedness to increase. The State deficit in 2023 will have been 173,3 billion, so near the level reached at the heart of the Covid crisis. Regarding 2024, the deficit included in the finance bill is estimated at 147 billion and the ratio with GDP would come back from 4.9% to 4.4%. But that presentation is based on two disputable hypotheses. The government estimates the growth in 2024 at 1.4% but the stagnation observed for six months makes this figure much too optimistic. The receipts based on this figure are quite also overvalued.
In short, the French economy at the beginning of 2024 is in stagnation with an unemployment increasing and huge public and foreign deficits. In the same time, the country is confronted with discontent waves provoked by the public services degradation and the growing intrusion of the State in the household and in the enterprise daily life. How did we come there? By a succession of major economic policy mistakes.
The first one is constituted by excessive financial transfers in favor of enterprises in the name of the research of a better competitiveness. There was first the CICE created in 2013 which was transformed in a permanent social charge reduction. To compensate these receipts losses, the State has increased taxes on household which has slowed growth without any positive consequence on investment and even less on competitiveness because the trade deficit regarding goods without energy has not ceased to increase as have just shown the last published figures.
In the same time, the State concentrated the charge reductions on low wages. Enterprises began to slow wages increases in order to keep these advantages and they became more and more reluctant to hire qualified jobs. The “Minimum Wage culture” denounced today by the government is just the consequence of the action of its predecessors. When it was asked to enterprises to increase their top of the range products which necessitated a high-level workforce, public subventions were concentrated on no or poorly qualified professions, which has leaded to a result exactly opposite to the objective.
The analysis according to which the labor cost was the main cause of the de-localizations and of the deindustrialization was wrong and to be convinced of that, it is enough to observe the industrial production trends. At the end of 2023, it has hardly recovered the 2015 level. But differences between sectors are striking. Electronic goods production has increased by 8% when the car industry has fallen by 7%. Pharmaceutical industry has grown by 36% and textile and goods by 7% when the wood and paper activity has fallen by 14% and refining by 20%. Industrial successes before everything depend from the good strategic choices of their executives and of the quality of their employees and not of the reduction of labor costs.
The last major mistake made by the State regards energy and the role of nuclear. During thirty years household as enterprises have taken benefit from a de-carboned energy source which was competitive and which provided to the country a major contribution to its sovereignty. The refusal to build new plants, the announced prospect of the reduction of the share of nuclear when the electricity demand was supposed to strongly grow in the name of the energy transition have weakened this industry at a time when France need it more and more. Financial consequences are heavy. The State had to create a “tariff shield” to protect household and enterprises from the perturbations following the invasion of Ukraine by Russia. To get back lost time will have a high cost for the community.
In economy, there is no fatality. The stagnation, the unemployment rebound, the heavy public indebtedness and the de-industrialization are not the consequence of chance when that phenomenon are lasting. France, as the other countries, has had to cope with external shocks but the weakening of the industrial fabric caused by the past mistakes has made these shocks more painful. To put back the country into the right way, it is indispensable to identify the made mistakes and to remedy to them. It is already the case about nuclear but it remains a lot of things to do. The State action efficiency will depend of its ability to de-bureaucratize. The expenses reduction which will result from it will allow to improving the public services quality, which will be perceived by the population as a first step in the understanding of its aspiration. Self-satisfaction is a remedy worse than the sickness.