The current account balance was very slightly in surplus in 2021. But, in 2022, the current account balance widened sharply, according to Banque de France data : France recorded a “historically high” deficit of 53.9 billion euros, or 2% of GDP.
The deterioration of this balance, which includes the balance of trade in goods and services and the inflow and outflow of money, is mainly explained by the increase in the country’s energy bill, linked to the Russian war in Ukraine, notes the Banque de France. The non-energy deficit is changing little, says the institution. “The energy bill explains the deterioration of the current balance in 2022, which makes it possible to anticipate an improvement in 2023”, explained François Villeroy de Galhau, Governor of the Banque de France, presenting the results of the annual report on the balance of payments, Thursday, July 20.
Under the effect of soaring gas and oil prices, France’s energy bill has increased by 70 billion euros, propelling the deficit in the trade balance of goods to a peak of 137.7 billion euros in 2022, against 67.4 billion in 2021.
By 2025, the balance of trade in goods and services should remain very negative, despite a slower widening of the deficit since the fourth quarter of 2022, according to data from the Banque de France.
Surpluses are improving
More generally, the Banque de France indicates that while France’s deficits are widening, surpluses (aeronautics, agri-food, etc.) are improving. Thus, the surplus on trade in services reached a historic level of 52 billion euros. The tourism surplus is increasing sharply, rising from 4 to 17.4 billion euros.
The surplus of maritime transport services already committed in 2021 continues to soar with a balance of 29.4 billion against 21.9 billion in 2021. The surplus of financial services continues to progress, in connection with the transfer of activity from London to Paris, also notes the institution.
“Our results are even more asymmetrical than usual: mediocre on the goods side and much better on the services side,” summed up François Villeroy de Galhau.
The “spectacular success” of the Parisian place
According to its central bank, France recorded a surplus of 10.4 billion euros in 2022 on financial services, after a surplus of 8.8 billion in 2021. As recalled The echoesif this improvement reflects the increase in commissions on securities and foreign exchange transactions in 2022, it is also explained by the “spectacular success” of the Paris financial center since Brexit.
“It has accelerated over the recent period and exceeds our expectations”, welcomed François Villeroy de Galhau. “Most of the major international banks have increased their staff in Paris by several hundred”, maintained the governor. “There is an element of collective success and we are not at the end of this momentum,” he added.
According to him, several factors explain the increased attractiveness of Paris: the presence of many regulators (EBA, ACPR, ESMA), the “vast spectrum” of financial activities offered in the French capital and the fact that the Paris Stock Exchange has become the “first capitalization in Europe”, ahead of London and Frankfurt.
The Banque de France also notes in its 2022 annual balance of payments report that France’s external competitiveness, measured by unit labor costs, has deteriorated slightly since 2019. “The deterioration in productivity is more significant in France than elsewhere”, underline the institution’s economists, while specifying that “this movement is not linked to the evolution of remuneration but to that of employment which is very favorable”.