France

Recovery ignited, but watch out for messy politics!

AA1

LOW RISK for entreprise

Economic risk
Business environment risk
Political risk
Commercial risk
Financing risk

Economic risk
Business environment risk
Political risk
Commercial risk
Financing risk

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GDP	USD 2603bn (World ranking 7, World Bank 2020)
Population	67.39mn (World ranking 21, World Bank 2020)
Form of state	Semi-presidential republic
Head of state	Emmanuel Macron (President)
Next elections	2022, presidential and legislative

Dynamic demographics
Infrastructures (e.g., transport) and public services are of high quality
Many international corporate giants and a growing presence of technological start-ups (‘French tech’)
Diversified economy
Tourism revenues
Quality education system

Dual labour market: Insiders vs. outsiders, leading to structurally high unemployment rate
Low employment rate among youth and seniors
Growing inequalities in spite of costly redistribution
Rapid deindustrialisation and low competitiveness of manufacturing firms
Lack of large SMEs that can bear the sunk costs associated with innovation and exports
Rent-based economy (e.g., retail distribution, taxis)
Elevated level of public spending and questionable efficiency

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In France, the domestic economy will be the major driver of the post Covid-19 recovery. With the accelerating pace of vaccination and the progressive re-opening of all sectors, we maintain our growth forecast at +5.4% in 2021 and +3.6% in 2022. French households’ excess savings reached over EUR140bn in the first quarter of 2021, thanks to supportive state measures that curbed the impact of the crisis on incomes. With the grand reopening, we expect the pent-up demand to boost GDP growth by around +2pp in 2021. In May, business confidence soared to a three-year high (above its historical average), while retail and services sectors have registered strong confidence gains. This rebound in confidence in the services sector, unprecedented in history, finally gives us a glimpse of the end of the multi-speed recovery between sectors.

The French presidential election will take place in less than a year, though only a few candidates, including Marine Le Pen, have officially announced that they will run. President Macron has unofficially started his re-election campaign on the back of easing sanitary restrictions in June. At the end of 2021, the government may decide to move forward with a softer version of the controversial pension reform. This could lead to social unrest, with detrimental economic consequences just ahead of elections. In addition to recurrent topics like security and immigration, we expect the following economic issues to shape the 2022 election campaigns: (i) boosting industrial competitiveness and export performance via production tax cuts and other economic incentives, (ii) achieving a green transition and implementing socially acceptable environmental policies, (iii) how to support the incomes of those in precarious conditions and (iv) pension and social security reforms. - June 2021

Trade structure by destination/origin

(% of total, 2020)

Exports	Rank	Imports
Germany 14.3%	1	17.3% Germany
Italy 7.6%	2	9.6% Belgium
United States of America 7.6%	3	8.6% Netherlands
Belgium 7.4%	4	8.3% Italy
Spain 7.3%	5	7.9% Spain

Trade structure by product

(% of total, 2020)

Exports	Rank	Imports
Road vehicles 8.7%	1	10.9% Road vehicles
Medicinal and pharmaceutical products 7.9%	2	6.0% Electrical machinery, apparatus and appliances, n.e.s.
Other transport equipment 6.6%	3	5.4% Medicinal and pharmaceutical products
Electrical machinery, apparatus and appliances, n.e.s. 6.2%	4	5.1% Petroleum, petroleum products and related materials
Other industrial machinery and parts 4.4%	5	4.4% Miscellaneous manufactured articles, n.e.s.

The payment behavior of domestic companies is good but does have some margin for improvement as the average DSO does not match the standards set forth in recent regulations stringently transposing EU payment standards into domestic law.

Low
Medium
Sensitive
High

Payments
Court proceedings
Insolvency proceedings

Payments
Court proceedings
Insolvency proceedings

French courts are fairly efficient in dealing with disputes in a timely manner.

The law in France provides for a complete set of restructuring proceedings when a company is facing financial difficulties, however, when liquidation proceedings are opended, the chances of collecting debts are very low.