French Economy Contracts by 0.1% in Q4 2024: Warnings of Continued Slowdown

The French economy experienced a slight contraction of 0.1% in the fourth quarter of 2024, according to official data from the National Institute of Statistics and Economic Studies (INSEE). This decline reflects growing economic challenges that could affect recovery in 2025.

Contraction Details

Contraction Rate: GDP fell by 0.1% in Q4, following 0.4% growth in Q3.

Decline in Consumer Spending: Household consumption dropped by 0.3%, compared to 0.6% in the previous quarter, impacted by rising inflation and declining purchasing power.

Weak Investments: Investments decreased by 0.1%, affected by a slowdown in the real estate and construction sectors.

Declining External Demand: French exports failed to grow sufficiently to offset domestic contraction, with both exports and imports increasing by 0.4%, resulting in a neutral effect on economic growth.


Reasons for the Decline

Analysts point to several factors behind this contraction, including:

1. High Inflation: Despite slowing to 3.1% in December 2024, inflation continued to weigh on household spending.


2. European Central Bank Policies: High interest rates aimed at curbing inflation led to weaker lending and investment.


3. Global Economic Slowdown: Economic slowdowns in Germany and China affected demand for French exports.



Official Reactions

The French government described the contraction as “temporary” and announced stimulus measures, including increased public spending to boost growth.

Finance Minister Bruno Le Maire mentioned the possibility of tax cuts for small and medium-sized businesses to encourage investment.

The French central bank predicted weak economic performance in the first half of 2025 but emphasized the potential for gradual improvement later.

Future Outlook

The French economy is expected to remain under pressure in early 2025 as markets anticipate European Central Bank decisions on interest rate cuts.

Some economists predict gradual improvement in the second half of 2025 if monetary restrictions are eased and local investment is stimulated.

Sources:

1. Sky News Arabia – French economy contracts by 0.1% in Q4 2024


2. Al Arabiya – French economy slows amid declining investments


3. Trading Economics – French GDP growth data


4. Reuters – Impact of inflation and interest rates on the French economy


5. INSEE (National Institute of Statistics and Economic Studies) – French GDP report for 2025