Economic growth in France is less than expected for this year with weaker consumer spending and investments, according to the central bank’s recent forecast. The European Commission cut its 2024 GDP growth forecast from 1.2% to 0.9%—as French manufacturing worsened toward the year-end of 2023.

Remarkable debt levels across major economies across the globe have bled into France as the country now faces a potential austerity budget mainly impacting the financial health of homeowners and consumers. The budget proposal contains a €16 billion savings to reduce the deficit to 4.4% of economic output for 2024, according to French Finance Minister Bruno Le Maire. “This budget represents a notable effort and is the first step on the trajectory of an ambitious plan to restore our public finances,” Le Maire said at a news conference.

The revision of the GDP growth forecast can be attributed to a weaker-than-expected second half of 2023. However, economic activity is expected to gather momentum in the second half of 2024.

The main challenges in the French economic sector include:

• Labor shortages
• A decline in production levels
• Continuation of interest rate hikes
• Geopolitical unrest

President Emmanuel Macron of France plans to work through layers of bureaucracy that are holding back French businesses as the economy faces headwinds. Le Maire also will present a bill of measures to the cabinet that targets thickets of administrative obligations the government says are a key reason for the economy’s long-term poor performance, per Bloomberg. “Our Europe today is mortal,” Macron said. “It can die and that depends solely on our choices … Europe must become capable of defending its interests, with its allies by our side whenever they are willing, and alone if necessary.”

Both wars in Gaza and Ukraine have contributed to the economic slowdowns in Germany and China making record-high interest rates take a much bigger-than-expected toll on growth. Cuts of up to 10 billion euros ($10.8 billion) in government spending on items including environmental subsidies and education in addition to the €16 billion in cuts announced means tighter restraints on consumer financial health.

By the numbers: Customers in France have averaged 10 days beyond terms, with 45% of credit professionals saying payment delays have stayed the same, per the FCIB Credit and Collections Survey. The most common causes for payment delays are customer payment policy (83%), cultural norms and customs (50%) and billing disputes (50%).

What FCIB Credit and Collections Survey respondents are saying:

• “Payment promptness over the summer is typically slower due to French companies operating with many staff members on holiday. Any billing disputes open in June may have to wait until August for resolution.”
• “There are some cultural differences like unwillingness to work in English vs French language.”
• “Follow up with the customer’s procurement and finance department as many times as necessary.”
• “Obtain financial statements on your customers and backstop sales with credit insurance.” 

The FCIB Credit and Collections Survey is now open. It covers Brazil, New Zealand, Singapore and Turkey. You will earn ICEU/participation credit for your input. Be sure to share the link with your credit and collections network.