French Economic Growth Slows to 0.2% in Q4 2025 Amid Domestic and External Challenges

The French economy experienced a notable slowdown in its growth during the fourth quarter of 2025, expanding by just 0.2% compared to 0.5% in the previous quarter, according to figures released by Insee on January 30. Despite this deceleration, France's GDP grew 0.9% over the entire year, slightly exceeding the government's initial forecast of 0.7% and matching expectations from most economists.

During Q4 2025, domestic demand remained a positive factor but showed signs of moderation. Investment growth slowed significantly to 0.2% from 0.7% in the third quarter, while household consumption picked up modestly, increasing by 0.3% compared to 0.1% previously. Domestic demand (excluding inventory changes) contributed 0.3 percentage points to GDP growth this quarter, down from 0.4 points in Q3. Meanwhile, foreign trade continued to contribute positively in Q4, adding 0.9 points to growth after 0.5 points in the prior quarter. However, exports grew at a much slower pace of 0.9% compared to 3.2%, and imports sharply declined by 1.7% following a 1.5% increase.

Significantly, stock variations had a negative impact on GDP growth, subtracting one full percentage point. This downturn in inventory levels suggests that production was scaled back due to either stronger-than-anticipated final demand or industry caution. Over the full year 2025, domestic demand accelerated moderately and supported growth by 0.7 points, driven by household consumption and public sector spending. Conversely, foreign trade shifted negatively, detracting 0.5 points from growth compared to a positive contribution the previous year.

In addition to internal factors, the French economy faces external challenges, notably currency fluctuations. The euro has appreciated by nearly 20% against the US dollar over the past year, reaching 1.20 dollars on January 27—its highest level since June 2021. This appreciation, while not at record levels (the euro peaked near 1.60 dollars in 2008), continues to raise concerns about France’s competitiveness on international markets given its already significant tax burden.

In summary, the French economic growth slowdown in Q4 2025 is attributable to slower investment, restrained export growth, and adverse changes in stock variations, compounded by a stronger euro that imposes additional competitive pressures on the economy. Going forward, monitoring these domestic and external factors will be critical to understanding France’s economic trajectory.