France is one of the major and most advanced European economies. As a founding member of the EU, and despite the effects of enlargement, France continues to be close to the centre of its decision-making process. As the EU expands, France will have opportunities to grow its export and trading relations. While the improving regional outlook may provide some upside potential, it may not be enough to spark a recovery in France’s manufacturing sector, unless the country addresses its competitiveness issues.
We keep our clients informed of the latest market moves and political developments in France, as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 20 of France’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert research teams. Our aim is to keep you ahead of the game, so you can operate with confidence in France.
France Country Risk
French economic growth will lag the rest of the eurozone over the next two years as investment growth and external demand remain lacklustre. Meanwhile, meagre wage growth and high unemployment mean that household consumption - traditionally the key driver of the economy - will become less able to support growth.
France will experience a temporary terms of trade boost in 2016 and 2017 which will keep its trade deficit from expanding significantly. Beyond 2017 we expect the structural inefficiencies of the French economy to result in an expansion of its trade and current account deficits.
While France will benefit from a cyclical economic upswing in the eurozone, it is too early to tell if improving economic conditions will be enough to save President Francois Hollande from elimination in the first round of the presidential...
France Industry Coverage (21)
BMI View: Grains production will see limited growth over the next five years as prices remain weak and France faces competition from other European producers on the export market. French dairy farmers will be among the EU's outperformers due to steady import demand for their cheese production. French meat production will suffer from continued weak demand from other EU countries, the traditional importers of French meat.
Wheat production growth 2014/15 to 2019/20: 3.9% to 40.5mn tonnes. Our forecasts indicate only moderate growth despite increasing import demand from the Middle East and North African, as we believe other grains-...
BMI View: Passenger cars will outperform CVs boosted by consumer borrowing and spending, while slow business investment improvements lead to slow CV purchase growth.
France Commercial Banking
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Defence & Security
France Defence & Security
BMI View: BMI 's France Defence & Security Report examines the current structure of the French armed forces. It evaluates ongoing defence reform initiatives and examines the position of France in NATO and its defence commitments around the world. In addition, it discusses the French defence industry and its performance both in home and international markets.
Regarding defence spending we expect France to spend USD53bn on defence in 2014. We believe that France will spend an average of USD51bn on defence between 2015 and 2019 with the defence budget increasing to USD52.8 by 2019.
In terms of defence exports, official figures published during Q414 noted that the value of French military exports had increasing by up to 42% in 2013, compared to 2012. French military operations have been said to have been very helpful as a '...
Food & Drink
France Food & Drink
BMI View: Our consumer outlook for France is brightening as economic activity returns to growth, though weak, following several years of recession. The easing of deflationary pressures is another positive dynamic, especially for mass grocery retailers. Nonetheless, with household incomes - especially in the lower and middle classes - remaining under pressure and high existing levels of food consumption, we forecast only tepid growth in the sector over the next five years. Food and drink categories that are perceived as healthy and/or convenient will outperform.
Headline Industry Data (local currency)
2015 food consumption (local currency) growth = +1.6%; compound annual growth rate (CAGR) 2014 to 2019 = +1.6%.
2015 alcoholic drink sales (local currency) growth= +0.4%; CAGR 2014 to 2019 = +0.9%....
France Freight Transport
BMI View: The French freight transport sector will experience tepid growth over 2015, with rail and air set to outperform road freight in terms of tonnage growth. Nevertheless, road will continue to dominate the freight mix over 2016, with over 95.5% of the total market share, followed by rail freight carrying 4.4% of total freight. We do not anticipate major changes to the freight mix through our forecast period to 2020 given the dominance of the road network, though significant investment in rail freight could increase the sector's market share in the longer term.
The French economy will grow by 1.4% in real terms in 2016, up from 1.1% in 2015. Private consumption will continue to be the main driver of growth though the structural impediments to a significant uptick in French activity remain. Since 2012-2013, there...
France Information Technology
BMI View: We hold a moderately positive outlook for the French IT sector in 2016 after downgrading our view for 2015 in our Q415 report. We forecast the IT market to grow by 1.4% in local currency terms this year to reach a total value of EUR53.26bn. Growth in dollar terms will be slower due to currency volatility and the strength of the US dollar. We believe the market will contract by 1.4% in dollar terms to reach a total value of USD56.99bn. This forecast does not alter our view of France as a mature IT market with lucrative markets for advanced IT products and solutions, as well as a leading ecosystem of local firms,...
BMI View : Our outlook for the French infrastructure sector remains subdued in 2015 and 2016. A weak domestic economic environment and ongoing policy and regulatory uncertainty are undermining investor confidence and we expect to see limited gains in terms of fixed capital formation. Overall, we expect to see construction industry value contract in 2015 by 1.5%, before returning to minimal growth in 2016.
Key Trends And Developments
Weaknesses in France's labour market - both in terms of unemployment and lack of competitiveness - support our negative outlook on the country's...
BMI View: France's insurance market is well placed to benefit from a gradual strengthening of the economy over the next few years and, especially, high levels of consumer spending as well as savings and investment activity. Longer-term, we expect the life and health insurance markets to enjoy the benefit of the country's sizeable and growing retirement age population while cut backs in public spending threaten state provided healthcare and retirement cover. That said, opportunities for new entrants will be sparse in a market dominated by large bancassurance groups and the major local mutual insurers.
France Medical Devices
BMI Industry View : France will remain the fifth largest market in the world over our 2014-2019 forecast period, despite a fairly modest US dollar CAGR of 2.4%. Further cost containment measures to control spending on medical devices will limit underlying growth in the market, which is primarily driven by the rising healthcare needs of the aging population and the need to keep pace with new technology.
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BMI View: France's metals sector continues to be buffeted by global headwinds, including falling steel prices and increasing competition from low-cost overseas producers. We are expecting French steel output to decline this year, following a series of contractions in recent years. While we forecast production to begin growing again next years, overall output will remain significantly below levels seen 10 years ago.
Though still among the largest producers in Europe, France's steelmaking capabilities have receded considerably over the past. Standing at more than 20mn tonnes (20mnt) a year in the mid 2000s,in the decade since, the country's total crude steel output has contracted by about 25% and is forecast to dip under 16mnt this year following a year-on-year (y-o-y) decline of about 1.3%. Rising labour and production costs and...
Oil & Gas
France Oil & Gas
BMI View: The overall level of investment in exploration and production in France remains weak and this trend is unlikely to alter significantly without an end to political opposition to exploration of shale oil and gas resources. Plans to begin production of gas from coal bed methane by 2017 could provide a much-needed boost to domestic output, but uncertainty over the project continues. Though downstream margins have benefited from cheaper oil prices, the long-term outlook for the refining sector in France, and in Europe more widely, remains largely pessimistic.
French chemicals and petrochemicals producers endured a mixed performance in 2015 even as economic growth picked up. Petrochemicals production has slid in recent years in line with an overall restructuring of the industrial sector as it faces slower domestic demand conditions and poor competitiveness. The outlook in 2016 looks bearish in spite of growth in the automotive and construction sectors, which is the largest consumers of polymers in France.
France's chemicals industry reported a 1.4% decline in output in the first seven months of 2015, while rubber production also fell 1.4% in the January-August period. However, plastic output was up 4.2% y-o-y and French exports received a boost, helping to raise the chemicals trade balance 2.1% y-o-y to EUR500mn.
The planned closure of Total's ethylene and propylene operations at Carling was completed in October 2015, marking a further...
Pharmaceuticals & Healthcare
France Pharmaceuticals & Healthcare
BMI View: The uptick in private consumption and economic growth in France will benefit the pharmaceutical and healthcare sector through the coming quarters. However, despite an improving regional and domestic economic environment, France's pharmaceutical market growth is expected to remain in negative territory in 2016, before it resumes expansion. Meanwhile, fixed investment rates are also expected to recover in 2016, although structural impediments will continue to hinder a more significant upturn in activity in the near term, including in the pharmaceutical sector.
Headline Expenditure Projections
Pharmaceuticals: EUR33.69bn (USD45.14bn) in 2014 to EUR33.46bn (USD36.80bn) in 2015; -0.7% in local currency terms and -18.5% in US dollar terms. Forecast in line...
BMI View: France has a well-developed and extensive domestic power network, including multiple interconnections with neighbouring states and robust generation and capacity. Consumption is expected to show only slow growth over our 10-year forecast period and there is little appetite for significant investment in new power infrastructure, though government renewable energy targets will drive robust growth in terms of wind, solar and geothermal power. Despite the expected growth in renewable energy, the domestic energy mix in France will remain dominated by EDF's nuclear power plants which will account for the majority of generation for much of the forecast period until government plans to...
France Real Estate
BMI View: Following strong growth in the Parisian office and retail sectors in 2014, we also expect the capital to bear the vast bulk of the commercial real estate's growth in 2015. This development can however not distract from the fact that beyond the city's borders, little growth and transactional activity is taking place, due to the difficult macroeconomic situation in the country.
The French commercial real estate market has experienced some upwind over 2014. Especially - yet unsurprisingly - Paris has seen significant growth in its office market and some renewed demand in its retail sector. Overall demand and transactional activity outside the French capital, however, remained curtailed. The same goes for the industrial property sector which continues to suffer from a stagnating economic recovery and low export levels...
BMI View: Improved regulatory clarity, strong government support and ambitious targets for non-hydropower renewables will make France one of our European renewables outperformers over the next decade. The passing of the energy transition in bill will help catalyse investor interest, supporting our upbeat growth trajectory for the sector over our 10-year forecast period.
BMI View: The French economy will post modest real growth throughout the forecast period, but will underperform in the broader EU context. Modest domestic consumption and business investment will not sustain strong growth of either employment or household incomes. As a result, retailers operating in this steady state market will look into consolidation and optimisation, rather than organic growth opportunities.
After remaining flat for three consecutive years, France's real output will begin expanding slowly in 2015. We forecast a modest 1.3% inflation-adjusted GDP growth rate, a mediocre expansion in the context of recovering euro zone. Importantly for retailers, unemployment rate remains high in France hovering at an average of 10.7% in 2015. The...
BMI View: The widening stage brought forward by Free's entry into the mobile market in 2012 is drawing to a close, with operators looking at deepening and upselling new services. All four operators have the advantage of being fully convergent, giving them a head-start to offer multiple services to single accounts. But other drivers also include M2M and the IoT, with Orange taking a lead in the segment, and leveraging its success to gain more net additions than its rivals. SFR will compete on quad-play and content, Bouygues on providing cheaper fixed broadband and advanced LTE, while Free will continue to offer pricing pressure through the launch of innovative services.
France has four fully converged operators offering fixed and mobile services to customers in the market. As it becomes saturated, operators will look to expend their premium services offers, as a way to...
BMI View: France has a large and varied tourism market, and attracts the greatest number of inbound arrivals worldwide. The French government is highly supportive, and both domestic and international hotel groups have invested in the country to a high degree. 2016 is set to be one of growth, albeit to a lower level than the year before. The country is set to hold Euro 2016 (an international football tournament), which will provide a boost to the industry, but terrorist attacks in 2015 may deter some visits over the course of the year, especially with the increased security checks and the potential suspension of free travel throughout the Schengen area, which would increase friction for car travel throughout the continent. Medical tourism is set to become a growth area over the next few years, with estimated increased revenue of EUR2bn by 2020.
France's water sector has seen many positive changes in recent years, especially as the government has striven to attain the high standards of quality and practice laid down by the EU. Developments to the infrastructure and technology of the sector have resulted in an efficient and productive industry, which in turn is governed by strong and clear regulations. The improvements, however, are ongoing. With much work still needed and projects continuing to be initiated, the sector is currently very favourable for investors - a fact that is backed up by favourable legislature and an openness to outside input.
The increase in developments and construction projects throughout the water sector, has led to demand for an increased workforce, alongside the introduction of highly skilled tradespeople. To meet this demand the French government is encouraging investment from both French companies and foreign ones. With a surge in the quality of workers,...