French economy - Forecast 2008

Résumé du document

Present-day world economy appears to be facing some serious challenges in sustaining its past robust growth. The credit crunch in the United States of America, as well as the United States dollar decline and high oil prices represent massive threats for the world economic equilibrium.

With this in mind, the year 2008 looks uncertain in terms of global performance. Even though European economies have proved surprisingly resilient in the face on an American recession, France shows some difficulties to cope with this general slowdown.
In this dossier, we will try to understand what are the past, future and present-day factors responsible for the recent French economic situation. These elements can be found in both the international and domestic environment. In a second part we will present the analysis of the real and monetary fields.

In 2007, three main crises have hit the global economy. The biggest one is the U.S. subprime mortgage market that then spread over other markets. There is also the real-estate crisis, especially in the US and in the UK, involving a decline in residential investment and spreading over Europe and Asia markets too. The third one is the higher energy prices and weaker house prices that dampen consumption spending.

However, in 2007, the world GDP growth was 4.9 %, which is still good.

We are going to analyze whether those crises are likely to impact stronger the world economy in 2008.

The chart below shows the world economy growth since 1999 and it points out its slowdown since 2007. The Société Générale expects a dip in 2008.

Extraits

[...] The recent forecast for 2008 is 4,1%. Hereafter is the distribution of the GDP growth among the main industrialized countries. Source: http://groupe.socgen.com/html/eco/GB/tele/eco_a.pdf; March 2008. This table highlights the fact that the real GDP growth from the main industrialized countries is lower than the world GDP growth. When looking closer at it, we notice that it comes from the high growth of China or India. Price of crude oil Source: http://www.eurotrib.com/story/2008/3/12/143238/164; March 18th This chart represents the evolution of oil prices from 1971 to March 2008 in four currencies: dollars, euros, ECU and DEM (Deutsche Mark). [...]

[...] We are going to analyze whether those crises are likely to impact stronger the world economy in 2008. World real GDP growth The chart below shows the world economy growth since 1999 and it points out its slowdown since 2007. The Société Générale expects a dip in 2008. Source: http://groupe.socgen.com/html/eco/FR/conjonc.html; April 2008 This table released on Crédit Agricole's website shows the GDP growth in 2007 per country and forecasts the rates for 2008 and 2009 as in April 2008. In 2007, the world real GDP growth was 4,9%. [...]

[...] The French transports were in strike at the end of last year, which slowed down the economy as a whole. What's more, present-day students' strikes are giving room to pessimism. As a consequence, those events are likely to damage the GDP growth. Second, the elections in France did impact the GDP growth as well. President Sarkozy was very popular when he came to power last year which definitively fulfilled the households' optimism, and as a consequence, economic growth. However, his unpopularity as well as his difficulties to give his reforms new wind could impact negatively the GDP growth. [...]

[...] The consumer opinion has worsened since June 2007. It fell dramatically from -13 in June 2007 to -37 in April 2008. We can note that French households were more pessimistic in regards to the future living standards. Consumer opinion (balance of responses, seasonally adjusted, Source: INSEE According to INSEE, business expectations are quite low in April 2008, as the index for business climate is decreasing by 2 points. Demand in Industrial goods fell from 1 in March 2008 to in April 2008. [...]

[...] Even though European economies have proved surprisingly resilient in the face on an American recession, France shows some difficulties to cope with this general slowdown. In this dossier, we will try to understand what are the past, future and present-day factors responsible for the recent French economic situation. These elements can be found in both the international and domestic environment. In a second part we will present the analysis of the real and monetary fields. I Economic context I International environment In 2007, three main crises have hit the global economy. The biggest one is the U.S. [...]