Analysis of the French Economy
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Executive Summary-France
The essay provides an overview of French history and economic analysis. France has evolved from a simple country in the Celtic territory to becoming one of the world’s leading nations. France’s economy has faced several challenges especially during the world wars where it was on its knees. However, after the war, economic activities were put in place to revive the economy. France has open trade policies that allow firms within the country to import and export commodities freely. The development of these robust open trade policies is intended to improve the competitiveness of its businesses in the international market. Being a member of the European Union has allowed the country to gain more markets for its locally produced products. France is ranked as the second-largest exporter of technology and other commodities in the European market. France’s internal policies on foreign investments are very stringent. The country is of the view of suppressing foreign firms to develop its local producers.
History of France
France is among independent nations located in western. In terms of its size, it is ranked as the third-largest country in the European League of Nations. The first two largest nations in Western Europe being Russia and Ukraine. France once formed part of the larger Celtic territory in ancient times. France became a country on its own back in the 9th century after the fall of the western roman territory. Its current name was derived from the Latin and Francia language which denoted a country that belonged to Franks. The country has undergone numerous reforms since the 9th century (Price, 2014). France’s economic capability has significantly recorded growth towards becoming a major player in the larger European economy and world events. During the 20th century, the country suffered a devastating effect as a result of world wars. The country has also faced numerous political and social crises including the loss of its empires such as Algeria and Indochina. Despite being ruined as a result of world wars, the country has significantly recovered to being one of the world’s leading suppliers of machinery, agricultural products and machinery. Current France has undergone a massive transformation in terms of politics, international influence and technology and military leadership. French territory currently extends from land to sea. France possesses an island in the Mediterranean Sea known as Corsica. Due to its global influence, the country has established several overseas departments to advance its political and economic affairs. French National assembly is utilized as the main platform to advance the political interests of its departments and territories.
French Trade Structure
France is among the leading economies in the European Union. As a result of its production capability, it is ranked as the second-largest exporter after its counterpart Germany. France is a major consumer of a lot of imported shopper merchandise, which are more affordable than items that are internally manufactured. Besides, France is considered among the leading importers of oil though it is very reactive to changes in oil costs. Being an individual from the European Union, the country needs to comply with the set standards and policy regulations concerning trade (France, 2020). Also, France and other counterparts within the union have different but equal financial arrangements in the union as well as their participation in the World Trade Organization. France is considered an open economy where all the investors can actively participate in exploring the available opportunities (France, 2020). Among stock, various rustic things are guaranteed at the European level, a methodology that France upheld, and French farmers have unquestionably been dependent upon government appointments. France gets a ton of FDI and adventure rules are normally clear, though various administrative impediments win. Alternately, the financial territory is reasonably closed, with two or three new banks working in the country.
French Economic Policy
France is a capitalist nation since the early 1980s. The country since then has supported free enterprise and market-orientated strategies. As a result of the capitalist economic policies, the government partially or completely privatized numerous public businesses such as Air France, and Renault motors (France, 2020). Most of the leaders continue to campaign and support capitalist economic policies. The French government does not fully allow the forces of the market to run the economy. In instances of market failure, the government is always prepared through established policies to provide stimulus packages for the revival of the economy. When the government faced a serious economic crisis, the public authorities mandated the responsibilities of aligning the forces of the economy and currency will always take the most appropriate action to revive the economy. Notwithstanding progressing changes to France’s methodologies, more essential change may be required to restore the economy. France’s housing market is feeling the squeeze on account of extreme expenses and low market activity. Strikingly, French money-related plan decisions are influenced by typical European Union methodologies and centres, similarly to France’s support in a supranational relationship, for instance, World Trade Organization. The country’s GDP has been on the constant rise for the past ten years at a constant rate of 2.3%. The disruption occurred in 2009 when there were minor contractions. The economy recently stalled due to the pandemic but it is expected to recover within a short period (France, 2020).
French Fiscal Policy
Over the last few years, France has experienced a considerable rise in its budgetary expenditure on social affairs and public commitments (France, 2020). As a result of this growing crisis, the government has undertaken some financial changes to reduce the impacts associated with too much spending and at the same time power the economy. The Retired President of France, is remembered for his evolutionally works by developing some strategies to minimize public expenditure to its lowest level. He is well known for his concerted efforts to revive the economy with minimal disruptions to the normal lives of its citizens (France, 2020). The current president Hollande was voted in due to his ambitions to minimize public expenditure and levelling the wealth by imposing higher taxes on the rich. However, the president has not yet fulfilled his ambition as the economy is still struggling to improve. He is expected to re-evaluate his money-related methodology and in 2014 he promised to cut government spending by nearly 40 billion within the course of three years.
French Balance of Payment
For the last fifteen years, France has continually operated a deficit current account (France, 2020). This is attributed to the fact that the country has been importing more goods. Besides, its exports have significantly reduced due to the loss of competitiveness for their products (France, 2020). The government has failed to improve its network on public relations beyond the European Union. As a result, France products have failed to compete successfully in the market-leading to their low demand. Despite the country operating a negative current account, the country receives a lot of money in form of profits from other investments. The government has extensively invested in foreign markets through its multinational firms. France is ranked among the leading nations in terms of direct investments and the benefits they receive directly.
French Inflation Rates
The inflation rate is a measurement of the average increase in prices of the most basic consumer goods over a certain period of time. For many years, inflation rates in the French economy have been fluctuating (France, 2020). The average rate in the fluctuation index is anticipated at 1.3%. Between 2000 and 2010, the inflation rates appeared to be decreasing at a steady rate. In recent years, inflation rates have been changing dramatically.
Implications of the Country’s Context for Multinational Firms Operating In France
France authorities under the ministry of the economy have continuously advocated for policies that discourage foreign investments in the country (France, 2020). The regulations have restricted any foreign firm from engaging in any financial and banking sector in France. This has significantly reduced the scope of investment that a foreign firm can engage in the country. France’s tax regulations are very detrimental to foreign investors since they emphasize taxing foreign firms higher than local firms. The trade structure adopted by the French government is very favourable for any international firm operating in the country. The French government has extensively deregulated importing and exporting activities to allow for free trade and market creation. However, these open trade policies have resulted in more imports into the country than the number of exports. This implies that most firms operating in France are more likely to lose the market for their products due to cheap imports.
References
Price, R. (2014). A concise history of France. Cambridge University Press.
FocusEconomics | Economic Forecasts from the World’s Leading Economists. 2020. France Economy – GDP, Inflation, CPI And Interest Rate. [online] Available at: <https://www.focus-economics.com/countries/france#:~:text=France%20is%20a%20relatively%20open,been%20dependent%20on%20government%20subsidies
Appendices
Figure 1 represents the inflation rates in France for the last 12 months. .obtained from focus Economics
Figure 2represents GDP growth in France obtained from focus economics