1. Executive Summary

France is one of the world’s five leading economies, as measured by GDP, has highly developed social and welfare model and is led by the socialist government. Though it scores well against numerous indicators of well-being, the state of economy is far from optimal.
In this report we provide the brief economic outlook of France in 2014. It shows that the main challenges are the big budget deficit that leads to high government debt, too-high-taxes that slow the growth of the economy in all sectors, huge unemployment level and negative trade balance.
Though in 5 years the economic situation is likely to improve comparing to today’s level, we forecast that the pace will be slower than needed. The structural reforms should be performed as soon as possible. We recommend use the supply-side policies, that concentrate on deregulation of the labor market, downsizing the government sector’ share in the economy by privatization of public enterprises and services, and lowering the tax rates. We believe these measures will help to boost the competitiveness of French companies and products in domestic and world markets, and will improve the growth of France’ economy in the medium and long term. 2. Current state of economy

France continues to underperform in 2014. In October 2014 the ratings agency Standard and Poor’s lowered its outlook from “stable” to “negative,” saying its financial recovery is “elusive”. Main indicators please see in Appendix 5.1.
GDP is projected to grow by only 0.4% in 2014 (0.6% planned), compared with 0.8% for the Eurozone as a whole.
Fixed investment has been dropping since 2012 and in 2014 appears to be falling at an accelerating pace (1.8%), despite rising capacity utilization. Its recovery is likely to be more lackluster than in previous recovery phases. French exporters mainly compete in price-sensitive markets