France’s government has revised its economic growth forecast for 2025 downward, adjusting it from the previous estimate of 0.9% to 0.7%. Work Minister Astrid Panosyan-Bouvet confirmed the update on Wednesday during an interview with France 2. She stated that the new figure aligns with the Bank of France’s latest projection, reflecting concerns over global trade uncertainties and domestic financial struggles.

The change will impact France’s 2025 finance bill, requiring adjustments to planned economic policies and spending. Economy Minister Éric Lombard also acknowledged the downgrade, suggesting that further revisions could come as economic conditions evolve.

Officials Brace for Economic Challenges

Lombard spoke about the country’s financial outlook at the National Assembly, warning of growing risks that could slow recovery. He described the current economic climate as fragile, citing external pressures and domestic issues that could weigh on growth.

The Bank of France had initially predicted a 0.9% growth rate for 2025 but lowered it to 0.7% in March. Officials believe that economic expansion will reach 1.2% in 2026 and 1.3% in 2027, but even these estimates remain uncertain due to shifting global market conditions.

The revised forecast reflects concerns over trade policies, inflation, and investment confidence. Higher interest rates and global economic slowdowns have added pressure, forcing policymakers to rethink their strategies.

Trade Tensions Add to Economic Uncertainty

One of the biggest external risks France faces is the possibility of new trade barriers. Former U.S. President Donald Trump, who is running for re-election, has threatened to impose a 25% tariff on European goods. While the full details remain unclear, France is already preparing for potential economic disruptions.

The U.S. is a major trading partner for France, ranking as the country’s fourth-largest export destination in 2023. French exports to the U.S. include aircraft, pharmaceuticals, and wine, with total shipments reaching nearly €16 billion last year. A tariff increase could directly impact these industries, leading to reduced trade and economic strain.

Although France may not be the hardest hit by potential U.S. trade policies, key industries remain exposed. Manufacturers and exporters are bracing for possible restrictions that could make their goods more expensive for American buyers.

Soaring Deficit Complicates Economic Plans

Beyond trade challenges, France is also dealing with a rising budget deficit. In 2024, the country’s deficit reached 5.8% of GDP, amounting to €169.6 billion. This figure is nearly double the European Union’s recommended limit of 3%, raising concerns about long-term financial stability.

Efforts to reduce the deficit have been met with political resistance. Former Prime Minister Michel Barnier attempted to introduce spending cuts and tax hikes to control the shortfall, but his proposals faced strong opposition. The failure to pass key budget measures contributed to the collapse of his government in December.

His successor, François Bayrou, managed to push through a revised budget plan in February, but economic challenges remain. The government’s current goal is to lower the deficit to 5.4% of GDP in 2025, with a long-term target of falling below 3% by 2029.

Political Instability and Financial Markets

France’s financial uncertainty is partly due to political instability. The country’s snap elections last summer led to a divided parliament, making it harder to pass economic reforms. Investors are growing cautious, leading to higher borrowing costs for the government.

Lombard noted that rising long-term interest rates are adding pressure to the national budget. The government now faces the challenge of maintaining investor confidence while trying to meet its fiscal goals.

Additionally, ongoing debates over EU defense spending reforms have created further uncertainty. Increased military spending requirements could strain national budgets across Europe, forcing France to make difficult financial choices.

Household Savings Slow Down Recovery

Another issue affecting France’s economy is the cautious spending behavior of households. Many people are saving more money instead of spending it, which slows down economic growth. While saving is beneficial for individuals, it reduces overall consumer demand, impacting businesses and job creation.

Lombard acknowledged that low household spending remains a major challenge. He warned that if people continue to hold onto their savings instead of investing in goods and services, economic growth could stagnate.

The government is exploring ways to encourage spending, but uncertainty over future inflation and employment trends has made consumers hesitant. Many people remain concerned about job security, leading them to prioritize savings over non-essential purchases.

The Road Ahead for France’s Economy

With slower growth expected, France will need to balance economic stimulus with fiscal responsibility. The government aims to continue investments in infrastructure, green energy, and technology while controlling public spending. However, achieving these goals in a politically divided environment remains a challenge.

For now, policymakers will closely watch global developments, particularly trade negotiations and central bank policies. The economic outlook remains uncertain, but officials hope that gradual improvements in market stability will help France navigate the challenges ahead.