In one of his Flash Economics reports published earlier in September, Patrick Artus took a look at the future of the French economy and tried to extrapolate what the country would look like in the year 2025. The report isn’t for the faint of heart—or at least not if you care about the French economy.
The report concludes that France will face a number of problems over the next twelve years, and the country will have to make major structural changes if it wants to avoid them. The good news is that the projection finds that income equalities will not change by much in the period, and that private sector debt will remain moderate. Now onto the bad news.
France in the next twelve years
The major trends in the next few years, according to Artus, will be the increasing technological sophistication of production, the functioning of the labor market, the education system, the efficiency of the State, and housing. Artus tackles the question of production efficiency first, and he doesn’t find many nice things to say about his home country.
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The above charts show that the total productivity of the French labor market has not fared well since the new Millennium began, and the country’s unemployment rate in sophisticated sectors has risen drastically in the same period. Some of the decline in productivity could be put down to the financial crisis, but unemployment in sophisticated sectors has no such excuse.
Artus says that if this trend remains prevalent, France will see a decline in the sophistication of its production in the next 12 years. By 2025, French production may actually be less sophisticated than it is today. In comparison to other countries, France will be way behind.
On the future of the labor market, Artus is similarly pessimistic. The French real wage does not respond to changes in unemployment, competitiveness, or profitability. This peculiarity is blamed on the strength of the unions in the country. If the structure of the French labor market is not changed, France will see high structural employment, and a fall in exports by 2025.
France’s government is the second biggest, in GDP terms in the OECD. This has meant high public debt and high government employment, as can be seen above. In the report, Artus extrapolates the government’s effect on the economy and concludes that government debt will continue to get higher while efficiency of the State gets lower. That means that France will be facing even worse debt problems in 2025 than it is today.
Artus also sees the quality of education in France declining over the next 12 years, and the real cost of housing rising. Both of these trends add to the weight of criticism of the French economy.
All in all, France in 2025 will not be a particularly good place to live if the government continues the economic policies it has espoused since the turn of the Millennium. The country faces huge structural obstacles that will have to be changed if it wants to rid itself of the economic crisis in the next decade. At least income inequality will be stable.