The French current account deficit shrank by €29.7 billion in the past six months, from -€39.3 billion to -€9.6 billion, primarily due to a fall in energy prices, which have made goods importations cheaper.
Imports of goods fell by 9.4% relative to the second half of 2022, while exports remained stable, with only a slight -0.8% fall. In money terms, the trade deficit was reduced from -€89 billion to -€54 billion, a difference explained mainly by a significant fall in energy prices after a volatile 2022 year.
The biggest rises in exports have come from the aviation industry, with exports up 12% in the last six months, and the automobile industry, with exports of electric vehicles increasing by 8%.
This is “very positive news”, French trade minister Olivier Becht told journalists on Tuesday (8 August). “We see an improvement [in the trade balance] even when factoring energy and military spending costs out,” he added, “in spite of global economic tensions” between Chinese and American superpowers.
All in all, trade has “clearly contributed” to economic growth, he added.
France’s 2022 trade balance numbers had reached a record-high deficit of -€164 billion, up from -€78 billion in 2021. At the time, 86% of this increase was attributed to exploding energy costs after Russia’s invasion of Ukraine, which almost trebled from €45 billion to €115 billion compared to 2021.
France’s – relative – success story in the first half of 2023 is also rooted in the Chinese economy’s sluggish restart following the end of all COVID-19 measures. French exports to China increased by 7.3% over the past semester, driven mainly by the aviation sector.
“We are winning points against Germany, whose exports to China have declined by 5% [in the same time period],” Becht explained.
Services and income surpluses
France has had historically high goods trade deficits, with enduring surpluses in both services and income. The trend continues this time around, with a €20 billion services surplus, driven by both the travel industry (+€11 billion) and financial services.
The numbers show that Paris is a thriving post-Brexit financial centre, according to Becht. In November last year, Paris overtook London as the EU’s largest stock exchange.
As for Foreign Direct Investments (FDIs), French companies’ international subsidiaries have seen incomes increase by +€3.4 billion. France remains the EU’s most attractive member state for third-country FDI, ahead of Germany and the UK.
France has also seen export levels increase to countries with which it has a free-trade agreement. Though “often vilified” as a threat to national sovereignty, Becht said, export numbers are particularly positive with the UK (+8%), enshrining a lasting trade surplus, and Canada, through the once-decried Comprehensive Economic and Trade Agreement (CETA), provisionally enacted in 2017.
Cautionary note
The government’s support for export companies is behind the successful deficit reduction, the minister told journalists, with a “clear improvement in our cost competitiveness”, a concept which relativises the costs of making a good country with the costs of making that same good somewhere else. France’s world market share in goods has gone from 2.5% to 2.8% in six months.
French President Emmanuel Macron’s much-touted reindustrialisation strategy – the contours of which are laid out in a ‘green industry’ bill currently under scrutiny in Parliament – also signals a greater ease of doing business with international investors, the minister said.
In spite of these results, Becht sounded a cautionary note: “We remain prudent, and there is still a long road ahead to close off the trade deficit completely,” he said, warning that “existing trends are subject to the whims of an international economic environment”.
Domestically tensions also play a role: the presentation of a new “exports plan” was postponed following the July riots. It is expected to be introduced in September.
[Edited by Nathalie Weatherald]
