France’s Economic Growth in Q2 2023

PARIS (Reuters) – France’s economy grew marginally faster than expected in the second quarter as a cruise ship delivery boosted exports, offsetting flat consumer spending, according to official data released on Tuesday.

Finance Minister Bruno Le Maire stated that this growth implies that the economy will likely exceed the outgoing government’s forecast of 1%, particularly with the upcoming Olympic Games expected to enhance activity in the third quarter.

The euro zone’s second-largest economy expanded by 0.3% from the previous three months ending in June, matching a revised 0.3% growth. This increase surpassed the average 0.2% predicted in a Reuters poll of economists, providing some relief to the government after facing criticism earlier this year for revising its 2024 growth forecast down from 1.4% to 1% while raising budget deficit estimates.

“We will probably have growth after all that is better than the 1% forecast in February,” Le Maire told journalists. “For two years, France has outperformed; our economic policies work and are providing tangible results.”

Le Maire noted that this better-than-expected growth could improve the strained budget deficit, emphasizing the importance of maintaining focus on reducing spending.

Currently, the country faces a political impasse after President Emmanuel Macron’s call for a snap parliamentary election in June led to a hung parliament. The left-wing alliance that emerged victorious in the election aims to form a government and radically shift France’s economic direction through a new tax-and-spending initiative.

According to INSEE, consumer spending, a traditional driver of French growth, stalled in the second quarter, resulting in a 0.1% increase in domestic demand, mainly due to a slight rise in business investment and a 0.6% increase in public investment.

Foreign trade contributed 0.2 percentage points to GDP; the delivery of the Utopia of the Seas cruise ship to Royal Caribbean helped exports rise 0.6%, while imports remained stagnant.

Despite the political crisis affecting business morale, economic activity is projected to reach 0.5% in the third quarter, bolstered by the currently ongoing Olympic Games, according to INSEE’s earlier forecasts.