France’s business climate index rose to 97 in March, from 96 the previous month, an indication of potential economic recovery, ING has said.
“That recovery is most noticeable in the retail sector, where business leaders are more optimistic about future activity and orders,” Charlotte de Montpellier, senior economist, France and Switzerland, ING, said in a briefing note. “Sentiment is stable in construction and services, and the outlook is improving, but it’s deteriorating slightly in industry, mainly due to a decline in foreign order books.
“Employment sentiment in France rebounded in March, gaining 3 points, although it remains well below its long-term average.”
Quarter by quarter
While the French economy saw a slight contraction, of 0.1%, in the fourth quarter of last year, growth is projected to be close to zero in Q1 of 2025, impacted by a restrictive fiscal policy and an uncertain international environment, ING noted.
This is likely to be followed by a 0.2% increase in the second quarter of this year, with potential upward mobility continuing into the second half of the year.
Spring recovery
“However, any spring recovery is set to be limited,” de Montpellier said. “The likely decision by the US administration to increase customs duties on goods from Europe could affect exports, business confidence, hiring, and investment.
“Fiscal policy, which calls for a structural adjustment of around 0.7 points of GDP to reduce the public deficit to 5.4% in 2025 from 6% in 2024, will impact households and businesses. INSEE estimates that government measures will reduce household purchasing power by 0.4 points and affect the financial position of businesses by 0.9 points of their value added.”
She added that the rise in long-term interest rates, driven by the loosening of fiscal policy in neighbouring Germany, will likely weigh on business and household investment.
ING expects GDP growth in France to be 0.6% in 2025, compared to 1.1% in 2024. France is likely to experience weaker growth than the European average in both 2025 and 2026, it noted. Read more here.
