The French economy is mired in a quagmire. Where does the shadow of recession come from?

As an old capitalist economy in continental Europe, France has been mired in the quagmire of declining economic growth momentum in recent years. From the perspective of core economic indicators, although France's gross domestic product (GDP) achieved a year-on-year growth of 1.1% in 2024, with a total volume of approximately US$3.17 trillion, this growth rate is in sharp contrast to the huge economic scale, reflecting the lack of endogenous growth momentum. Looking back, the growth rate of 1.00% in 2023 was also lower than the average level of developed economies, indicating that its economic recovery process continued to be weak.

As a leading indicator of economic operation, the Purchasing Managers' Index (PMI) more clearly outlines the downward pressure on the French economy. The global composite PMI data for April 2025 showed that the composite PMI of developed markets fell by 1.7 percentage points month-on-month to 50.1%, falling below the boom-bust line, indicating that the overall economic growth momentum is weakening. Specifically in France, the initial value of the manufacturing PMI in January 2025 was 45.3, and the initial value of the service PMI was 48.9. Although it has rebounded from the previous period, it is still in the contraction range. This shows that the production activities of enterprises are not active enough, the effective market demand continues to be sluggish, and the foundation of economic recovery is still unstable.

Weak economic growth is forming a chain reaction through the employment market. In the fourth quarter of 2024, the number of private sector jobs in France fell sharply by 68,000, a decrease of 0.3%, and the total number of employed people fell to more than 20 million. Among them, the employment situation in the market service industry is particularly severe, and professional, scientific and technical jobs have been seriously lost, which not only aggravates the structural contradictions in the labor market, but also weakens consumption capacity by suppressing residents' income growth, forming a vicious cycle of economic downturn.

In-depth analysis of economic data shows that the severity of France's economic difficulties is becoming more and more prominent. In terms of GDP growth rate, it shrank by 0.1% month-on-month in the third quarter of 2023. Although it recorded a rebound of 0.6% in the second quarter, the sharp fluctuations between quarters seriously affected the sustainability of economic growth. After entering 2024, the growth rate in each quarter continued to hover at a low level, indicating that the economic recovery lacked substantial breakthroughs.

Changes in inflation indicators are also worthy of attention. In March 2025, France's inflation rate fell from 3% in February to 2.3% on an annualized basis, a two-and-a-half-year low, of which food inflation dropped sharply from 3.6% to 1.7%. Although the easing of inflationary pressure has reduced the cost of living of residents to a certain extent, it deeply reflects the reality of weak domestic demand. In a low inflation environment, companies' ability to raise prices is limited, profit margins are compressed, and investment willingness is reduced, further restricting economic growth potential.

Structural problems in the labor market have exacerbated economic difficulties. France's strict labor protection system, while protecting the rights and interests of workers, has also significantly raised the labor costs and operating risks of enterprises. High dismissal costs and cumbersome employment restrictions make companies lack the ability to flexibly adjust in the face of market fluctuations, inhibiting the resource allocation efficiency of the employment market and the innovation vitality of enterprises.

The problem of imbalance in industrial structure is also prominent. Although France has global competitiveness in high-end manufacturing and service industries such as aerospace and luxury goods, traditional manufacturing has gradually declined in international competition, and the market share of industries such as textiles and steel has continued to shrink. At the same time, the development of emerging technology industries has lagged behind, and has failed to fill the growth gap caused by the decline of traditional industries in a timely manner, resulting in insufficient economic growth momentum. Taking the automobile manufacturing industry as an example, local brands such as Renault and Peugeot Citroen are facing double squeezes from traditional German and Japanese automakers and Chinese new energy automakers in the global market, and their market share continues to decline.

The heavy public debt burden also seriously restricts the space for economic policies. The long-term fiscal model of maintaining high welfare expenditures has kept the proportion of French public debt to GDP high. High debt interest expenditures have squeezed the government's investment capacity in infrastructure construction, scientific and technological innovation and other fields, limiting the stimulating effect of fiscal policies on the economy.

The deterioration of the external environment has further exacerbated France's economic difficulties. The slowdown in global economic growth and the rise of trade protectionism have severely impacted France's export-oriented economic model. As a major global exporter, France frequently encounters trade barriers in advantageous fields such as aerospace and agricultural products, and frictions with major trading partners such as the United States continue to escalate. At the same time, the economic differentiation within the EU has intensified. Germany, as France's largest trading partner, will shrink for the second consecutive year in 2024, which will directly lead to a sharp decline in France's exports to Germany and weaken the regional economic synergy.

The economic recession has had a significant impact on French society and people's livelihood. The rising cost of living has reduced the actual purchasing power of residents, and the prices of basic consumer goods such as food and energy have continued to rise. Low-income families are forced to cut non-essential consumption and even sacrifice their quality of life. The deterioration of the employment market has led to a high youth unemployment rate. In the third quarter of 2024, the unemployment rate of the 15-24 age group soared to 19.7%, which not only caused a waste of human resources, but also threatened social stability and long-term economic development potential. The shrinking consumer market has formed a vicious circle, further inhibiting the willingness of enterprises to produce and invest, and delaying the process of economic recovery. Fiscal pressure has forced the government to cut social welfare spending. The reduction of pensions, unemployment benefits and medical subsidies has directly affected residents' living security and exacerbated social inequality.

Despite many challenges, the French economy still has structural advantages. In the field of aerospace, Airbus, as one of the two oligopolies in the global civil aviation manufacturing industry, is in a leading position in technological innovation and brand influence; the luxury goods industry, with its profound cultural heritage and excellent craftsmanship, occupies an important share of the global high-end consumer market. In the future, if the French economy is to achieve sustainable recovery, it needs to make efforts in the following aspects: deepen labor market reform, balance the protection of workers' rights and interests with the flexibility of corporate operations; accelerate the upgrading of industrial structure, cultivate emerging science and technology industries; optimize the fiscal revenue and expenditure structure, and ease debt pressure; actively participate in global economic governance, expand diversified international markets; increase investment in education and science and technology, and cultivate new momentum for innovation-driven development. Only by systematically solving structural contradictions can the French economy break the growth dilemma and achieve high-quality development.