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- GDP (PPP):
- $2.6 trillion
- 0.4% growth
- 1.0% 5-year compound annual growth
- $40,375 per capita
- Inflation (CPI):
- FDI Inflow:
The French economy is highly diversified, and institutional strengths like strong protection of property rights and a comparatively efficient regulatory framework facilitate entrepreneurial activity. Various reforms have been attempted to boost the economy’s lagging competitiveness and flexibility, but progress has been uneven.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 62.3 (down 0.2 point)
- Economic Freedom Status: Moderately Free
- Global Ranking: 75th
- Regional Ranking: 32nd in Europe
- Notable Successes: Rule of Law and Open Markets
- Concerns: Management of Public Finance and Labor Freedom
- Overall Score Change Since 2012: –0.9
Responsible for more than half of GDP, the government still dominates major sectors of the economy as a large shareholder in many semi-public enterprises. Various stimulus measures have resulted in a deterioration of public finance. Despite recent reform efforts, the labor market remains rigid, undermining long-term productivity and employment growth.
François Hollande was elected president in May 2012, and his Socialist Party has majority control of the National Assembly. Hollande’s poor handling of the economy has led to low approval ratings. The conservative UMP (Union for a Popular Movement, now renamed the Republicans) made significant gains in the March 2015 local elections. France was a leading participant in NATO’s March 2011 military engagement in Libya and has sent troops to Mali and the Central African Republic to counter advancing Islamic militants. France began airstrikes against ISIS in spring 2015 and suffered major terrorist attacks in November that killed 130 and injured hundreds more in Paris. The economy is diversified, and economic growth hit a two-year high in May 2015, but unemployment, debt, and government spending also remain high.
Although the government actively promotes transparency, accountability, and civic participation, France continues to face corruption challenges in such sectors as public works and the defense industry. An independent judiciary and the rule of law are firmly established. Property rights and contract enforcement are secure, but real estate regulation is complex and inefficient. France is a strong defender of intellectual property rights.
The top personal income tax rate is 45 percent, and the top corporate tax rate is 34.3 percent. Other taxes include a value-added tax. The overall tax burden equals 45 percent of GDP. Recent tax hikes have focused on high earners and large corporations. Government spending equals 57.5 percent of total domestic output. With deficits hovering around 4 percent of GDP, public debt has reached around 95 percent of GDP.
With no minimum capital requirement for launching a firm, the business start-up process is relatively straightforward. The labor market remains stagnant. The labor code’s rigid regulations have hurt competitiveness and increased unemployment. Price controls affect a number of products and services. France is the largest recipient of subsidies under the European Union’s Common Agricultural Policy.
EU members have a 1 percent average tariff rate. Trade agreements are currently being negotiated with countries that include the United States and Japan. The government invests directly in firms in many sectors throughout the economy. The financial sector remains under relatively strong state influence, with only a small number of foreign banks operating.