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- GDP (PPP):
- $2.2 trillion
- 1.7% growth
- 0.5% 5-year compound annual growth
- $35,156 per capita
- Inflation (CPI):
- FDI Inflow:
France’s economic freedom score is 64.1, making its economy the 62nd freest in the 2013 Index. Its overall score has increased 0.9 point, primarily because of a large improvement in investment freedom. France is ranked 30th out of 43 countries in the Europe region, and its overall score is higher than the world average.
With chronic deficit spending and accelerating deterioration of public finances, the French economy earns only a “moderately free” ranking with scores below average for the Europe region. Reform measures have been attempted to boost the economy’s lagging competitiveness and flexibility, but progress has been marginal and even derailed in some cases.
Institutional strengths related to the protection of private property rights and an efficient regulatory framework are beginning to be eroded by populist policy choices that favor income redistribution and maintenance of costly welfare programs. A new 75 percent top income tax rate is expected to be in effect in 2013. Undermining productivity and efficiency, the state continues to dominate major sectors of the economy and remains a large shareholder in many semi-public enterprises.
Socialist François Hollande defeated center-right President Nicolas Sarkozy after a second round of voting in the May 2012 presidential elections. The Socialist Party also won control of the National Assembly in June 2012. Hollande campaigned on a platform of higher taxation, increased government spending, and a pledge to reverse Sarkozy’s austerity measures. Formally reintegrated into NATO’s military command structures, France remains apart from NATO’s Nuclear Planning Group but was a leading participant in NATO’s March 2011 military engagement in Libya. France was a founding member of the European Union and has struggled to maintain its traditional influence over EU policy as membership has grown. It has a diversified economy but also is the top recipient of market-distorting agricultural subsidies under the EU’s Common Agricultural Policy.
Property rights and contract enforcement are secure, and the rule of law is strongly maintained. The judiciary functions well, is independent, and sustains the country’s basic foundations of economic freedom. Intellectual property rights are respected in accordance with international standards. Anti-corruption measures are in place to ensure transparency and government integrity.
The top income tax rate is 41 percent as of June 2012, and the top corporate tax rate is 34.4 percent. Other taxes include a value-added tax (VAT). The overall tax burden corresponds to 42.9 percent of GDP. Recent tax hikes have focused on high earners and large corporations. Government spending amounts to a very high 56.1 percent of total domestic output. With deficits hovering around 5 percent of GDP, public debt continues to rise.
With no minimum capital requirement for launching a firm, the business start-up process is relatively straightforward. The labor market continues to be stagnant. Ostensibly protecting workers, the labor code’s rigid regulations appear instead to have hurt competitiveness and increased unemployment. Price controls affect a number of products and services.
France’s trade policy is similar to that of other members of the European Union, with the common EU weighted average tariff rate standing at 1.6 percent. There are some barriers to trade in services. Investment regulations are generally transparent, but bureaucratic impediments persist. The financial sector remains under relatively strong state influence, with a small number of foreign banks operating.