The French growth last publications do not let us forecast a rebound enough for the government objectives regarding employment and the public finances recovery are met next year. During 2023 3rd quarter, INSEE has revised downward the GDP evolution to -0.1% compared to its first estimation of +0.1%. The acquired growth for 2024 would only be 0.6%. Banque de France has also revised downward its forecast for 2024 to 0.8% against 0.9% in its previous publication. This figure is very inferior to the growth rate inscribed in the Finance bill for 2024, i.e. 1.4% and put into question the credibility of the objectives of reduction of the public deficits because fiscal resources would be lower than expected.
The first consequence concerns employment. Three indicators are generally used to analyze the job market, the number of created jobs, the unemployment rate and the evolution of the number of jobseekers. If the employees number increased since the beginning of the year, we note a real slowing for the last six months with only a 63 000 jobs increase, which is not enough to compensate the arrivals on the job market. The unemployment rate so rebounded to 7.4% during the 3rd quarter and the objective to bring it back to 5% in 2027 will be more and more difficult to reach. The number of jobseekers in Metropolitan France (category A) also rebounded to reach 3.023 million at the end of October. There is so a perfect consistency between the strong slowing of the activity and the unemployment rebound, which bodes not to something good for the 2024 year.
Regarding inflation, the results are better than forecasted and they let hope a return in 2024 near 2% which would favor purchasing power. In November, consumer prices have fallen by 0.2% which brings them on twelve months to its lowest level for more than a year, 3.5%. Only foods prices have a strong increase (+7.7%), which makes worse the perception of inflation for household. To the opposite, we see a progressive return to normal of the energy prices with the reduction of the tensions on oil and natural gas supplies along with the coming back into operation of the nuclear power plants which will have a positive impact on electricity prices. The other major item in household consumption, rents, remains with a 2.6% increase on a moderate trend.
The re-industrialization policy has not, until now, given any result. The best indicator is the foreign trade. The deficit had reached its historic peak in 2022 with 163 billion, caused by the energy bill. France was in the same time confronted with the stoppage of near half of its nuclear power plants, with the fossil fuels prices increases due to the invasion of Ukraine by Russia and with the European regulation which indexed the electricity prices on the natural gas ones. During the last twelve months with the reduction of the energy bill, the deficit came back to 120 billion, but no progress has been made on the manufactured goods exchanges whose deficit is still increasing. It went from 4.1 billion in July to 5.4 billion in October and the deficit for the full year will be around 50 billion.
Since 2013, with the creation of the CICE and after the charges reductions granted to enterprises, the support of the supply side policy has been at the center of the government action. The evolution of the foreign trade shows that it has not given the expected results and 2024 wouldn’t show any improvement. The manufactured goods production has not still regained its 2015 level but it has very different evolutions according to the industrial sectors. Pharmacy, textile, clothing, leather goods and electronics have progressed when the car and the steel industries or the chemistry have not ceased to see their productions falling. The de-industrialization so is not a general phenomenon. It results from the different strategies adopted by the enterprises. To offer to all of them a contribution through social or taxes advantages without any commitments is not the solution to the contrary to what has been chosen by the government and the trend has no chance to be reversed in 2024. To multiply announcements, rarely followed by concrete effects, to pride itself on welcoming foreign investments and to distribute checks would not constitute an answer, especially if, as it is the case with thermal renovations, the procedures to obtain the aids are so complex that the concerned economic agents most frequently renounce to get them.
But this policy has a cost and is by large responsible of the accumulation of the public deficits for ten years. When interest rates were near zero and sometimes negative, the increase of the public indebtedness did not generate new charges for the State budget. Everything has changed with the appearance of inflation which has increased the cost of the reimbursement of the indexed bonds coming at maturity, with the rates increase which has immediately weighted on the Treasury Bonds costs and more progressively on the mid and long-term bonds ones.
For the State alone, the charge has passed from 33 billion in 2022 to 43 billion in 2023 and would be superior to 50 billion in 2024. The 2024 budget deficit is forecasted at 145 billion, which will generate a new and important increase of the State debt. To talk in these conditions about a “debt stabilization” or even about an “acceleration of the debt reduction” is a disinformation. This message which is based on the reduction of the ratios between the deficit and the debt compared to GDP must not create an illusion because that reduction results only from the increase of the denominator, thanks to inflation, and not from the reduction of the numerator. The French economy is so confronted with a twin degradation, that one of its economic results and that one regarding its public finances which well shows that the followed policy is in the same time inefficient and costly.
Enterprises and household have well understood that. The first ones, due to a business climate which is not favorable, will have low investments in 2024, except in some very visible sectors as the batteries for electric vehicles. Household will continue to prioritize their financial savings. The goods consumption, which has again fallen in October, will not recover and the acquisition of homes will not rebound due to the persistence, at least until the middle of the year, of high interest rates. The fall of the housing permits delivered in 2023 (-26% year-on-year at the end of October) excludes any recovery in 2024. The penury of rented homes would so continue, contributing to increase the household worries about their life conditions, which is, there too, hurting the economic activity.
The faith in the future is a determining condition of growth. The published indicators since September about the business climate, the unemployment trend, the household consumption and their financial savings show that this faith, despite the optimistic declarations of the government, didn’t come back. 2024 could have been for France thanks to the end of the sanitary and energy crisis, the year of the rebound. It strongly risks to show the entry in a durable period of stagnation if a new economic policy based on appropriate choices regarding the France situation is not put into place.