France Economics Research Guide

1. Introduction

1. Introduction of The Country

This report is based on my analysis on France’s economics condition from year 2007-2016. France is a part of the European Union, which consist of most country that establishes in the Europe Continent. France GDP main contributors is the Services sectors, Agriculture, and Manufacturing high value goods. Currently, services sectors in France is the main contributor in France’s GDP. In agreement with CIA (Central Intelligence Agency), France GDP is made up of Services sector contributes over 78% of the country GDP, Industries contributes about 19%, and Agriculture contributes about 1.7%.  France is considered as one global leaders in manufacturing automotive, aerospace equipment, transportation equipment, cosmetics, and luxury goods. Furthermore, France is also the most visited country in the world, making tourism a major contributor in the country GDP. France’s GDP ranks at number 6 in the world and the third largest economy in the Europe behind Germany and United Kingdom. France’s GDP tops at 2.465 Trillion USD in 2016.

These following report will focus on analyzing France’s real GDP, GDP Growth Rate, GDP per capita, unemployment, inflation and how government policies will help in achieving stable economics in the country

1. Production Output Performance Analysis

1. Real GDP of France

Real GDP is assessment of economic output in a country that include analysis of the effect of inflation and deflation, giving more realistic numbers than normal nominal GDP.

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The graph above shows that France GDP was declining rapidly after the year 2008. This was because of the global financial crisis that most of the world suffered from. Basically, France’s economy was supported by a combination of private sectors business that works with strong government intervention. The France’s government spending was about 53% of the total GDP. The global financial crisis in 2008, was caused by housing bubble in the US and banks lends to much money to investors that they cannot pay in the end (Posner & Friedman, 2011).  The crisis has created the global “flight-to-quality” which resulted in collapse of equity price. France as a globalize nation was also affected. Firm in the country suffer from credit crunch and low liquidity. Firms could not invest money at the time. During the early of the global financial crisis, France’s government were denying that the France economy is falling down to recession. Unemployment rate rose up and their citizens were losing job. This causes household consumption to go down and many companies undergoes bankruptcy. Moreover, household have to spend less because of companies bankruptcy and they earn less. In addition to the unemployment rate increases, citizens undergoes debts that they cannot pay. These conditions reflects to the banks collapsing as there are no capital coming to the banks.

1. Real GDP Growth Rate of France

Real GDP Growth Rate is used to measure the GDP rate of change in a country from one period to another. Real GDP growth rate shows how much a country economy increase or decrease in percentage over a period of time.

[pic 2]After the global financial crisis in 2008, France’s economy started growing back to normal. The GDP growth rate rose sharply and went back to the condition before the global financial crisis in 2008. The government implemented fiscal policy to counteract the effect of the crisis. One of the fiscal policy is that the government implement the recapitalization of banking sectors, which helps the economy to be more stable. Based on CNN in 2008, France governments recapitalize banks with €10.5 billion to the 6 largest banks in the country in order to help the government to stabilize the economy. This money invested by the government will be used to help banks to finance household and business. France have set aside €360 billion to help stabilize the economy. These fiscal policy have resulted in preventing the economy to falling and helps in returning it into normal.

1. Real GDP per capita of France

Real GDP per capita is a rough measurement of how much a person in a country earns according to the GDP value and the population in the country. Real GDP per capita is measured by taking the value of real GDP divided by the population of a country.

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In 2008, France’s GDP per capita suffered a sudden drop of $1500. This correlates to the global financial crisis that France suffered. The economic recovered on 2009 by government policies that helps to reduce the risk and stabilize the economy.

In 2011 – 2012, there was a slight decrease in the GDP per capita. This was because of immigrants settled in to the country. According to the data from OECD, The country received around 220 thousand immigrants that year. They were given France citizenship, while there are high unemployment rate problem in the country. An increase in population for France is good. However, For immigrants that can hardly finds any job causing unemployment rate rise up and GDP per capita to go down. In addition, France GDP per capita after the economic is growing slow compared to Germany.

        Both France and Germany belongs to the European Union. They suffered the crisis and recovered at the same time. However, Germany GDP per capita grows faster and surpasses France GDP per capita in 2016 by around $3500. This was more likely because of Germany have successfully tackled high unemployment rate after the crisis in 2008. Germany’s educational system encourages students to learn working on a specific jobs rather than pursuing college degrees with no work guaranteed after graduating.  Germany also implemented policy that helps employers and employees during the economic downturn. Employers that are facing economic problems could reduce the employees working hours rather than firing them. By reducing the employees, employers cut down their expense on wages and salary and saves money. Meanwhile, employees still have income and are not jobless during the economic downturn (Norris, 2013).These policy has help Germany to recover faster than France and reduce unemployment rate. Furthermore, France’s unemployment rate is still high and there are no signs of decreasing in the future.

        Therefore, France started to reform their policy on labour force dismissal, working hours, and followed Germany policy on cutting working hours and reduce pay. They have just recently started to reform in 2014 and the effect is still uncertain as it will take a while to affect the France economy.

        The GDP per capita correlates with a country unemployment rate. If a country has more employed workers, this means that the GDP per capita is higher. While, a country with high unemployment rate will have a lower GDP per capita. More employed worker means more income and household consumption will increase the GDP.

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