France Weathering Economic Storms Better Than Neighbors in 2019

(Bloomberg) --

As global economic weakness drags Europe into a deeper slowdown, France is staying relatively bullish.

Business investment, tax cuts and a buoyant labor market mean statistics office Insee is sticking to the 2019 economic forecast it made in June, despite a summer of worsening protectionism and rising political and economic upheaval for France’s main trading partners.

“It’s above all domestic demand that is allowing French growth to resist,” chief economist Julien Pouget said at a presentation in Paris.

Insee sees the French economy growing 1.3% this year. That’s more than twice the figure expected for Germany, where the country’s leading research institutes this week slashed their forecasts.

While Insee’s outlook only runs to the end of the year, it highlights characteristics of the economy that provide some shelter from global headwinds. Its less exposed than Germany to the current trade turmoil, and a propensity to use deficit spending to fuel demand is proving fortuitous when borrowing costs are low.

Still, the risks of France getting caught in a storm are rising. Pouget noted that if German domestic demand weakened it would affect France, and a disorderly Brexit would hit the economy. France’s exports could also weaken next year after getting a boost from aircraft and boat deliveries at the end of 2019.

“The international risks -- above all the downside risks -- to this scenario are numerous,” Insee said in its report.

To contact the reporter on this story: William Horobin in Paris at whorobin@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Zoe Schneeweiss

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