France is a modern country and a leader among European nations. The country's president, Emmanuel Macron, is the founder of the center-left Forward! Party, and is the youngest president since the establishment of the Fifth Republic. The country's economy is diversified, and the leading industries are tourism, manufacturing and pharmaceuticals.
France is the second largest economy in the EU after Germany, and the country is the fourth most populated in Europe. However, it has maintained slow population growth since the mid-2000s.
France has struggled with high unemployment since the 2008 global financial crisis as have other EU countries. But while unemployment has since improved for other European nations, it has continued to affect France's productivity and competitiveness. France’s main economic challenges for France going into 2019 are to tackle its high rate of unemployment, increase competitiveness and combat sluggish growth.
1. High Unemployment
The unemployment rate in France was 9.1% in the second quarter of 2018, down from 9.2% in the previous period. According to Statistica, France has the fourth highest unemployment rate among European countries. For youths and persons aged 25 to 49, the unemployment rate dropped while it was stable for those aged 50 and over. The employment rate for the population aged between 15 and 64 years was 65.8, the highest level since the early 1980s.
Sustained high unemployment is a drain on the French economy because social safety nets that must accommodate the unemployed will grow and be supported by a smaller fraction of the populace. High sustained youth unemployment is especially worrisome because it stunts skill development and wealth accumulation of the generation that should drive the economy in future decades.
Macron plans to spend 15 billion euros ($18.5 billion) on job training over the next five years and plans to increase sanctions against unemployed workers who do not look for work by reforming unemployment benefits.
2. Lagging Competitiveness
France has seen its competitiveness wane. The nation has had a current account deficit every year since 2006, meaning that France imports more than it exports. In 2014, a payroll tax credit scheme was launched to help French firms to be more competitive, but they still find it difficult to compete with German companies.
France's current account deficit dropped from 16.7 billion euros in 2016 to 13.1 billion euros ($16.14 billion) in 2017, which was partly because healthy tourism revenues helped offset the nations energy bill.
According to Reuters, many French firms cannot find sufficient skilled labor to meet their orders, which further hampers economic recovery. Government reforms of apprenticeships and vocational training could help in this regard.
Where France is seeing improvement, however, is in foreign direct investment. While French firms are struggling to gain market share abroad, foreign companies are attracted to doing business in France, which has become more business-friendly since Macron assumed the presidency.
in 2017, foreign direct investment in France was the highest it has been in 10 years at 44 billion euros, an increase of 12 billion since 2016.
3. Sluggish Growth
France's economic growth is expected to have dropped from 2.3% to 1.7% in 2018. France's real GDP had been on the rise in recent years. In 2017, France's real GDP grew by 1.85%.
The government, which had cut spending to meet European Union deficit targets, had been targeting growth of 2% for 2018 but rising oil prices, a strong euro, threats of a global trade war, and political uncertainties in Europe are slowing the country's growth.
A positive prediction by the French national statistics agency, however, is that the aviation and shipbuilding industries will boost exports, and households will benefit from payroll and residency tax cuts, which could stimulate consumer spending.