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France Country Risk Report Q2 2018

France Country Risk Report Q2 2018

Executive Summary

Core Views

French economic growth will average 1.9% in 2018-2019, up from 0.8% in 2012-2016, aided by a cyclical upswing in eurozone and global economic activity, and stronger fixed investment.


Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Reforms Supporting Growth Forecast
After accelerating to a six-year high in 2017, the pace of French real GDP growth will remain robust in 2018 as strong demand and
reforms spur further improvements in the labour market. Rising capacity constraints and an improving real estate market will drive a
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Monetary Policy
Implications Of ECBâ„¢s Dovish Taper
The European Central Bankâ„¢s tapering announcement in October points the way to a gradual exit from extraordinary accommodation,
but we continue to believe that policy will remain very easy for years. Our core view is that the ECB will continue expanding its balance
sheet until the end of 2018 and keep its benchmark interest rates on hold until 2020, a policy mix that will keep the euro on the back foot
against the US dollar
Fiscal Policy And Public Debt Outlook
Fiscal Dynamics Improving Despite Limited Consolidation Efforts
There will be minimal budget consolidation in France over the coming years, although the governmentâ„¢s efforts to cut the tax burden
and prioritise capital over current expenditures are positive from a growth perspective. The public debt load will also remain elevated,
momentum.
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
TABLE: FISCAL POLICY
Outlook On External Position
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
TABLE: TOP 5 GOODS IMPORTS IN 2015
TABLE: TOP 5 GOODS EXPORTS IN 2015
Currency Forecast
EUR: Rally Running Out Of Steam
We maintain a bearish outlook for the euro, predicated on our hawkish policy rate forecasts for the US Federal Reserve and our belief
that expectations for the pace of European Central Bank tightening are beginning to overshoot
TABLE: BMI EUROZONE CURRENCY FORECAST
Chapter 2: 10-Year Forecast
The French Economy To 2027
Weak Growth In The Decade Ahead
The French economic model is looking increasingly threatened over the coming decade, with tepid growth, rising debt loads and
persistent unemployment expected to characterise the countryâ„¢s long-term outlook. Despite this somewhat bleak prognosis, we highlight
that we expect France to outperform relative to some of its regional peers
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Macron Facing New Challenge From The Right
The new leadership of Franceâ„¢s centre-right Republicans presents a threat to President Macronâ„¢s chances of winning a large number
of seats in his next main electoral challenge, the 2019 European Parliament elections. The Republicansâ„¢ Laurent Wauquiezâ„¢s platform
offers rightwing policies on immigration, social integration, and the EU, without the associated political baggage of the far-right Front
National, and as such is poised to do well if he can unite warring factions in his party
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Political risk in France will remain relatively elevated over the coming decade, with the far right becoming more assertive and social
tensions staying high. However, President Emmanuel Macronâ„¢s reformist drive will help reduce Franceâ„¢s chronically high unemployment
Chapter 4: Operational Risk
Operational Risk
TABLE: LABOUR MARKET RISK INDEX
TABLE: LOGISTICS RISK INDEX
TABLE: CRIME AND SECURITY RISK INDEX
TABLE: TRADE AND INVESTMENT RISK INDEX
Chapter 5: BMI Global Macro Outlook
EM Growth To Accelerate In 2018 While DMs Plateau
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES ’ REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS ’ REAL GDP GROWTH, % y-o-y

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