France Faces Economic Stagnation Amid Italy's Catch-Up and Structural Challenges

France's economy has experienced modest growth averaging 0.8% annually between 2019 and 2024, trailing Italy's 1.1% growth rate, raising concerns about France’s economic position in Europe. Italy's GDP per capita has now reached parity with France’s, marking three consecutive years where France has fallen below the European Union average in this metric. However, this parity is partly attributed to Italy’s temporary Superbonus green construction incentive and demographic decline that artificially inflates its GDP per capita. In contrast, France’s stable birth rates suggest a potentially more sustainable future workforce.

Economists caution against simplistic conclusions based solely on GDP per capita. Anthony Morlet-Lavidalie emphasizes that GDP per capita does not fully capture living standards, advocating for metrics based on final consumption which reflect household purchasing power. Unlike China’s growth driven by investment and exports, consumption remains central to the French economic model.

Despite resilience, the French economy faces slow decline characterized by stagnant productivity, weak innovation, and underinvestment in private sectors since 2022. Deloitte’s chief economist Olivier Sautel highlights France’s significant lag in digitalization compared to American firms. Maintaining living standards has largely depended on rising public debt, prompting warnings about the sustainability of France’s economic model.

These structural issues suggest a gradual erosion rather than abrupt fall in France’s economic standing, necessitating strategic reforms to bolster productivity and innovation to secure long-term growth.