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France Cuts 2024 GDP Growth Forecast to 0.5% Amid Fiscal Strain and Heatwaves
yonhap_finance · 2026-09-12
The French government has lowered its 2024 economic growth outlook to 0.5%, citing high interest rates, political uncertainty, and climate-related costs.
What Happened
Growth Forecast Downgrade: The French government has revised its 2024 economic growth forecast down to 0.5%, with a 1.0% projection for the following year. This marks a significant reduction from earlier expectations, driven by persistent geopolitical tensions and rising energy costs.
Multiple Economic Headwinds: Finance Minister Roland Lescure identified four primary shocks impacting the economy: political uncertainty, energy price spikes, extreme summer weather, and rising borrowing costs. Climate-related damages from heatwaves and droughts are estimated to cost the economy between 0.3% and 0.5% of GDP.
Surging Bond Yields: France's 10-year government bond yield has climbed to 4.448%, reaching its highest level since 2008. The spread against German bunds has widened to 94.5 basis points, reflecting heightened investor concern compared to other European peers.
Fiscal Challenges: With a debt-to-GDP ratio of 117.6%, France significantly exceeds the Eurozone average of 88.9%. The government has effectively abandoned its target to cap the fiscal deficit at 5% of GDP, signaling ongoing difficulties in managing public finances.