France: key economic indicators

France and Britain vie for the 4th rank in world's largest economy category. However, Gross National income of France Economy was $1523025 (2003) fell short of UK'S income and hence was placed at 5th position in 2003.
population with 60.424 million people residing there in mid 2004. According to data obtained from World Bank Indicators, national growth rate in France during 1997-2003 was 0.4% slightly less than that of high-income countries' group as a whole.
France is moderately populated with 111 persons living per sq km in 2004. Almost half of the population lives in Paris, Lyon, Marseille/ Aix-en-Provence, and Lille. 76% of the people live in urban areas and enjoy a longer life (life expectancy at birth in France is 79 years, third highest among all countries of the world,) according to (1997-2003) World Bank figures.
The UNDP 2004 report shows that 8 % of France's population lives below income poverty line (50% of median household income). Gross primary enrolment, which denotes the percent of school-age population, is 105, with 106 for male and 104 for female population. Adult Literacy rate is the same as other high-income countries, 99 %. France is ranked 16th in 177 countries of the world in terms of human development index.
THE FRENCH ECONOMY OVER THE LAST HALF-CENTURY
For over twenty years, the ups and downs of the business cycle have affected Europe and France, as well as the United States, but the periods of falling unemployment have always been shorter and less intense that the periods of rising unemployment. Economic growth in France and Europe is still lagging behind growth in the United States (Chart 1). Is slower growth inevitable in Europe? Can recent events explain it?
-- 1945-1973: the post-war boom and rising unemployment
-- Oil shocks and slower productivity growth
-- European construction, beating inflation
-- A (temporary) resumption of growth
-- 1945-1973: the post-war boom and rising unemployment
After the Second World War, the developed world enjoyed a long period of strong growth (Table 1). Mass production and technical innovations boosted labour productivity in the dominant economy, the United States, by 2.5% per year. Europe and France also benefited from this wave of innovation, along with two specifically European phenomena: reconstruction of war-damaged production facilities and housing and technological catching-up with the United States. The combination of investment in capital and technology generated labour productivity growth of some 5% per year. During this period, output per capita, meaning wealth per capita, increased nearly fourfold.
The gradual industrialisation of Europe led to sweeping social changes: the farming population joined the ranks of factory workers. In France, the share of employment in agriculture declined from 20% in the nineteen-sixties to slightly more than 10% in 1970. Industrialisation meant increasing urbanisation and rural flight. These changes in French society brought with them the rapid development of a sound social welfare system that increasingly replaced occupational schemes with a universal system. Unemployment insurance, pensions, healthcare and family benefits, along with education, are the mainstays of an administered non-market economy that is financed by social transfers.
OIL SHOCKS AND SLOWER PRODUCTIVITY GROWTH The end of the Bretton Woods monetary system in 1971 and the first oil shock following the 1973 war between Israel and its Arab neighbours brought the cycle of expansion to a close. The tensions that surfaced at the end of the nineteen-sixties led to inflation of around 6% in France and Europe and 4% in the United States in 1968. This inflation explains why the decision was made to end the convertibility of the dollar to gold.
A recession hit in 1975 as France's GDP contracted by 0.3% and the United States' GDP fell by 0.4%. In the period from 1973 to 1979, average growth was well below 3% per year. Europe suffered from a great deal of monetary turmoil and unemployment rose by nearly five percentage points over a decade. After hovering around 3% in the nineteen-sixties, the jobless rate topped 8% in 1983.
The end of the this post-war boom, know as the Trente Glorieuses (thirty glorious years) in France, also led to much slower productivity growth. In the nineteen-seventies, labour productivity growth in France was halved from 5% per year to 2.6%. The economies of the developed countries went through a deep crisis.
France's economic trends are very closely tied to trends in Europe with regard to GDP growth, inflation and unemployment. The forerunner of Monetary Union, the "monetary snake" was set up in 1972, followed by the European Monetary System (EMS). These moves officialised and consolidated the links between European economies. The second oil shock in 1979 dealt another blow to the world economy and caused a surge in inflation.
EUROPEAN CONSTRUCTION, BEATING INFLATION Economic trends in America and Europe started to diverge sharply at the beginning of the nineteen-eighties. Inflation in the United States fell sooner than it did in Europe, which enabled growth to resume and unemployment to fall in the United States in the second half of the nineteen-eighties.
Growth in Europe recovered later, probably as a result of the 1986 oil counter-shock, an the unemployment gap vis-à-vis the United States widened, even though it seemed to narrow in 1986.
The French government implemented an inflation-fighting policy of competitive disinflation in 1983. This policy ended index-linking of wages and pegged the franc to the Deutschemark ('franc fort'). It also liberalised France's economy through privatisation and deregulation. The divergences between Europe and the United States became more marked in the nineteen-nineties. The 1990 Gulf War and the reunification of Germany in 1990 brought about a recession in Europe in 1993. German reunification initially stimulated European economies, but it gave rise to strong inflationary pressure in Germany.
From reunification until 1998, the main objective of economic policy was to achieve the single currency and meet the convergence criteria set out in the Maastricht Treaty. Inflation, fiscal deficits and public debt had to meet precise criteria. The policies implemented for this purpose weakened growth and increased unemployment as inflation and fiscal deficits were curbed.
The pegging of the French franc to the Deutschemark under the 'franc fort' policy explained much of the growing gap between French and European unemployment rates. French unemployment was about one percentage point higher than the average for the future euro area, whereas French inflation was about one percentage point lower.
Soft growth in Europe was in contrast to strong growth in the United States. In the nineteen-sixties, Europe's living standards had been catching up to those in the United States, but, in the nineteen-nineties, American living standards rose much more quickly than Europe's.
A (TEMPORARY) RESUMPTION OF GROWTH Europe enjoyed an upswing in growth from 1997 to 2001. Unemployment started to fall in mid-1997.
The upswing was boosted by catching up of the cumulative investment shortfall from the early part of the nineteen-nineties. But the recovery in labour productivity growth in the United States that started in 1995 held out hope of a new wave of growth driven by new information and communication technology. American productivity posted growth rates at the end of the nineteen-nineties that were comparable to those seen during the post-war boom (Table 1). The gap between the United States and Europe widened, but the knock-on effects of this fresh wave of growth enabled Europe to enjoy strong growth as it caught up with the world's dominant economy. Up until then, however, there had not been any breaks in the European productivity growth trend.
France's employment policy at the end of the nineteen-nineties probably contributed to strong employment performance in France and the narrowing of the unemployment gap vis-à-vis its main partners. In 2000, France's growth was close to the 3% growth for the euro area, while its unemployment fell twice as far, posting a 1.5-percentage point decline in France versus a 0.7-point decline in Europe.
The introduction of the single currency was marked by a period of strong growth, as the efforts to achieve European convergence and curb inflation paid off.
However, this wave of growth dropped off suddenly at the beginning of 2001 and the model of technology-driven growth revealed its limitations, as overly optimistic expectations led to overcapacity, certain projects yielded disappointing returns and spectacular scandals shook the financial markets. The single currency played a discreet but decisive role in these gloomy economic circumstances. Some countries, such as Italy or Spain, would have been sorely tempted to devalue their currencies to limit the negative effects of the overall economic slowdown and the stronger euro. In 1993, such moves had disrupted the EMS and driven up interest rates. There was more solidarity in the euro area between 2001 and 2003. However, the outlook for the euro area is gloomy. Even though the United States is enjoying strong growth, the consolidation of Europe's fiscal deficits is holding back growth and leaves little room for fiscal stimulus. In 2003, there was a repeat of the choice made in the nineteen-nineties to aim for stability rather than growth.
However, there is one clear lesson from the events of the last twenty years: periods of falling unemployment have always coincided with periods of strong economic growth.
ECONOMY France is one of the world's major economic powers. Agriculture plays a larger role than in the economies of most other industrial countries. A large proportion of the value of total agricultural output derives from livestock (especially cattle, hogs, poultry, and sheep). The mountain areas and NW France are the livestock regions. The country's leading crops are wheat, sugar beets, corn, barley, and potatoes, with the most intensive cultivation N of the Loire; the soil in the Central Massif is less fertile. Fruit growing is important in the south. France is among the foremost producers of wine in the world. The best-known vineyards are in Burgundy, Champagne, the Rhône and Loire valleys, and the Bordeaux region. The centers of the wine trade are Bordeaux, Reims, Épernay, Dijon, and Cognac.
France's leading industries produce machinery, chemicals, automobiles, metals, aircraft, electronics equipment, and foods (especially cheese). Advanced technology industries are growing as well. Tourism is an important industry, and Paris is famous for its luxury goods. In addition to the Paris area, important industrial cities are, in the northeast, Metz, Strasbourg, Roubaix, and Lille; in the south-east, Lyons, Saint-Étienne, Clermont-Ferrand, and Grenoble; in the south, Marseilles, Toulouse, Nice, and Nîmes; and in the west, Bordeaux and Nantes. Other important cities are Orléans, Tours, Troyes, and Arles.
More than half of France's trade is with other European Union members. Japan, the United States, and China are also important trading partners. Leading exports are machinery and transportation equipment, chemicals, foodstuffs, agricultural products, iron and steel products, textiles, and clothing. Leading imports are crude oil, machinery and equipment, agricultural products, chemicals, and iron and steel products. Nuclear energy furnishes 75% of all electricity produced in France. The chief ports are Rouen, Le Havre, Cherbourg, Brest, Saint-Nazaire, Nantes, Bordeaux, Toulon, Dunkirk, and Marseilles.
France has an extensive railway system, the Société Nationale des Chemins de Fer Français (SNCF). The first of a number of high-speed rail lines (TGVs) was completed in 1983, linking Paris and Lyons. Subsequent lines connected Paris to several other French cities, as well as Belgium, the Netherlands, Germany, and, via the Channel Tunnel, Great Britain.
The government previously had majority ownership in many commercial banks, some key industries, and various utilities, including the telephone system. There has been recent movement toward privatisation, with the government reducing its holdings in many companies, although it still controls energy production, public transportation, and defence industries.

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Table 1 - GDP and labour productivity growth (%)

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GDP growth   1950-1973  1973-1979  1979-1990   1990-1997  1997-2000  2000-2002*

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France             5,0        2,8        2,2         1,4        3,6         1,4

European Union     4,8        2,4        2,3         1,7        3,1         1,1

United States      3,6        2,6        2,6         2,3        4,2         1,3

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Labour productivity

growth       1950-1973  1973-1979  1979-1990   1990-1997  1997-2000  2000-2002*

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France             5,0        2,6        2,1         1,3        1,4         0,0

European Union     4,5        2,7        1,9         0,9        1,1         0,1

United States      2,5        0,7        1,1         1,4        2,9         0,9

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