After the victory of Emmanuel Macron in the presidential election in May and the majority hisnew party La République En Marche has achieved in the National Assembly, France will see limiteddefence spending increases. These increases will be facilitated by increasing dividends from state owneddefence companies and a steadily growing economy boosting fiscal revenues. President Macron is alsolikely to purse deeper integration on defence and security matters with the European Union and to maintainan active counter terrorist role in regions such as the Sahel and the Middle East. France is expected to liftits state of emergency in late 2017 nonetheless; the ongoing threat of terrorism will remain very highthroughout our forecast period. France will also be active in NATO deployments to Eastern Europe and incyber defence to counter the threat Russia poses to the post-Cold War European order. French defencemanufacturers cover the vast majority of national procurements but will continue to look to internationalexpansion. France's defence industry already has seen record sales in 2016 chiefly due to its naval andaerospace capabilities and has gained a large and growing share of the expanding Middle East and Asia/Pacific defence markets. We expect this trend to continue in 2017 and in the following years. We expect thelocal defence industry to develop shared designs and production capabilities in cooperation with foreigncompanies over the next few years.