After the Banque de France, it is INSEE’s turn to paint an unfavorable picture for next year. French GDP growth should not exceed 0.2% in the first and second quarters of 2025, INSEE estimated on Tuesday December 17 in its economic report, which continues to forecast zero growth in the fourth quarter of 2024. “The signals emerging from surveys on households and businesses paint a gloomy landscape,” Dorian Roucher, head of the economic situation department of the National Institute of Economics, said at a press conference. the statistic, without excluding better results “if confidence returns quickly”.
Dorian Roucher admitted that arithmetically, it would take “quite significant” growth, “high for the French economy”, of 0.8% in each of the last two quarters, to achieve the growth forecast of 1 .1% advanced so far by the government. Such a possibility, however, remains quite improbable, unless “the positive hazards manifest themselves immediately, that is to say that confidence returns quickly, households start to consume and the factors which weigh down investment stand up a little,” he continued.
For the moment, INSEE rather predicts, by mid-2025, that “the two engines of 2024 would die out”: foreign trade, vigorous in 2024, would “normalize” downwards, while the renewal identical to the budget of the previous year – hypothesis on which the institute’s scenario is based due to the lack of implementation for the moment of a new budget after the censorship of the Barnier government – would result in a brake on public spending. Private demand would then “weakly take over”: investment would “remain constrained” by uncertainty, and only the consumer would carry some of the growth”, according to the institute’s note. Investments should thus remain almost stable in start of the year, while household consumption, up 0.9% in 2024, should increase by a further modest 0.1% then 0.3% at the start of 2025.
Unemployment rate
If INSEE recalls that the employment rate (69.1%) continued to increase, reaching its highest level in the third quarter of 2024 since the institute began measuring it in 1975, the institute nevertheless indicates that the unemployment rate should also rise to 7.6%, compared to 7.4% currently, job creation being insufficient to compensate for the increase in the active population. “In the fourth quarter of 2024 and the first half of 2025, mainly as a result of the pension reform, the active population would continue to increase,” indicated the National Institute of Statistics in its economic note. “By mid-2025, the private sector would begin to destroy salaried positions, particularly apprentices, and employment should slow down significantly in the public sector.”
INSEE specifies that its forecasts do not include the “uncertain” effects on the unemployment rate of the RSA reform, the generalization of which from January 1 will result in the automatic registration of 1.2 million additional beneficiaries to France Travail. Finally, the institute emphasizes that “the political situation and its budgetary consequences remain a source of unknowns”. According to its note, INSEE “assumed the renewal in 2025 of taxes according to the scales in force on the revenue side, and of services voted in 2024 on the expenditure side”. It therefore does not take into consideration the effects on employment of any budgetary restrictions that could be taken.