France’s economy weathers political uncertainty with vote on budget — with hope of higher growth – Firstpost

France’s economy is set to rise and expand about 0.2 per cent in the fourth quarter, down from 0.5 per cent in the previous three months, questioning the budget next year, the central bank said.  

The economy of France is growing modestly despite intense political uncertainty over the 2026 social-security budget, with recent data and central bank surveys. The central bank expects output to keep expanding at the end of 2025.

Output continued to expand in November, with industry recording a particularly strong performance, according to the Bank of France’s monthly survey of 8,500 firms, published on Tuesday.

France has faced recurring political crises, with minority governments struggling to pass crucial budget legislation, since President Emmanuel Macron lost his majority in a snap election last year.

The central bank’s monthly survey, which polled executives from roughly 8,500 companies between November 26 and December 3, pointed to continued economic momentum in November, driven largely by industrial activity outperforming its long-term average for the sixth consecutive month.

Bank of France Governor Francois Villeroy de Galhau has said uncertainty is weighing, with political upheaval causing a drag of around 0.2 percentage point.

The survey found that the upswing in industry was stronger than anticipated, fuelled by a surge in production of computer, electronic, and optical products.

“Businesses are still emphasising that the uncertainty comes from a lack of visibility on whether the budget is voted,” Bank of France Chief Economist Olivier Garnier said.

Central bank chief Francois Villeroy de Galhau said, “We have four years to reduce the deficit by 2.4 per cent. We need to cover a quarter of that distance in the first year. We need to reduce it by at least 0.6. So I believe it would be desirable for the deficit not to exceed 4.8 per cent in 2026,” he added.

Outgoing French Prime Minister Sebastien Lecornu said late last month he was aiming for a budget deficit of around 4.7 per cent of GDP in 2026, down from a forecast 5.4 per cent this year.

(With inputs from agencies)