Why France's Economy Matters So Much: France by the Numbers

Jon C. Ogg

Western financial markets got a major boost on Monday morning. Dow Jones Industrial Average futures were up over 1% (200+ points), the CAC 40 in France was up 4.5% (230 points), the DAX in Germany was up 3.1% (375 points) and the U.K.’s FTSE 100 was even up 1.9% (134 points). What investors are cheering is that Macron topped Le Pen in the French elections, with a coalition expected to give Macron a formal victory next month.

The first thing to consider is that the financial markets are still global, facilitated by international trade, multinational corporations, tourism and multinational banking — oh, and of course more than a few international alliances. The first thing that U.S. investors will want to consider is that if Le Pen really has no chance of victory then there is very little threat to France’s government staying in the European Union. Macron was also deemed by the international media pundits as more friendly to economics and the markets.

Many U.S. investors might think that they do not have to care about France. For better or worse, that just isn’t the case. 24/7 Wall St. has decided to show why France’s economy matters, by the numbers. Some outside market data was used, but the primary economic source used here has been the CIA World Factbook.

First and foremost, France is the second most important nation to the EU (behind only Germany) and to the formal euro currency. After the U.K. Brexit, any threat to France’s future in the euro would have been a potential killer for the united euro currency, as Germany might not be able (nor want to) be the only economic lynchpin for the euro.

The CIA World Factbook shows France’s gross domestic product (GDP) on a purchasing power parity basis (and in 2016 dollars) as $2.737 trillion in 2016. When compared to the EU as a whole, that is estimated as 14.3% of $19.18 trillion. Germany, the cornerstone of the EU, was projected to have a 2016 GDP of $3.979 trillion.

France’s estimated $2.737 trillion GDP in 2016 is up from $2.701 trillion in 2015 and up from $2.667 trillion in 2014. France is ranked at the 11th largest economy in the world by GDP, but that would be the 10th largest if you do not count the EU as a whole. That $2.737 trillion GDP in 2016 was only marginally behind the United Kingdom’s $2.788 trillion (just 1.8% less). France’s GDP in 2016 was also projected to be one place above Mexico’s $2.307 trillion (18.6% higher) and two places above Italy’s $2.221 trillion (23.2% higher).

On a population basis, France’s 66.8 million people ranks as being the 22nd highest. The EU’s total population is roughly 514 million. Germany’s population is 80.7 million and the United Kingdom has 64.4 million people.

France’s total labor force in 2016 was projected to be 30.48 million. That ranks 22nd in the world. The EU as a whole had a projected total labor force of 232.9 million people, and France’s 30.48 million people in the labor force compared to Germany’s 45.3 million people and the U.K.’s 33.17 million people.

France’s economy is diverse and not dependent on just one sector, although its services sectors as a whole accounts for more than 78% of total GDP. Still, with over 84 million foreign tourists each year, France is considered to be the most visited country in the world. France also was shown to derive the third largest income in the world from tourism.

Other aspects of France’s economy are around unemployment, public finances, taxes and more, according to the CIA World Factbook:

The unemployment rate (including overseas territories) increased from 7.8% in 2008 to 9.9% in the fourth quarter of 2014. Youth unemployment in metropolitan France decreased from a high of 25.4% in the fourth quarter of 2012 to 24.3% in the fourth quarter of 2014.

Lower-than-expected growth and high spending have strained France’s public finances. The budget deficit rose sharply from 3.3% of GDP in 2008 to 7.5% of GDP in 2009 before improving to 4% of GDP in 2014 and 2015, while France’s public debt rose from 68% of GDP to more than 98% in 2015, and may hit 100% in 2016.

France’s tax burden remains well above the EU average and income tax cuts over the past decade are being partly reversed, particularly for higher earners. The top rate of income tax is 41%.

Whether U.S. investors like it or not, France matters in the global economy.