Macroeconomic Analysis of France: A Five-Year Outlook

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Variable/Year 2019 2020 2021 2022 2023 5 year
average
USD$Real
GDP/Capita
42,472.71 44,030.88 45,438.77 47,024.14 48,623.94 45,518.08
Growth rate of
Real
GDP/Capita (%
change per year)
1.61 1.68 1.65 1.60 1.50 1.60
Inflation Rate
(%)
1.32 1.55 1.58 1.75 1.85 1.61
Unemployment
Rate (%)
8.8 8.4 8.1 7.9 7.6 8.16
Interest Rate (5-
year fixed
mortgage rate)
INTRODUCTION
There are basically two types of economics- microeconomics and macroeconomics.
Macroeconomics is a branch of economy which tells the economy performance as a whole. Its
main aim is to collect, organize and analyze the data. The elements of macroeconomics are
unemployment, inflation, deflation, gross domestic product and interest rates. “Study of
macroeconomic play an important role of business and, therefore has significance for the overall
competitiveness of the country. Macroeconomics stability alone cannot increase the productivity
of the nation, it is also recognized that macroeconomic disarray harms the economy” (Wang &
Le, 2018).

Forecasting plays important role in different fields. Economics forecasting helps to make
predictions of the economy. It helps to take right decisions, its main purpose is to determine the
future. This paper discusses the about the future forecast of a country, France and its
macroeconomics variables such as GDP, growth rate, inflation rate, unemployment rate and
interest rate from 2019 to 2023. Furthermore, it also focuses on the historic factors and
background of the country, France and the importance of above five macroeconomics variables
will also be discussed in the paper.
BACKGROUND AND HISTORY
France is in Western Europe and its capital is Paris. It is bounded by Atlantic Ocean and the
Mediterranean Sea, the Alps and the Pyrenees. It is the important agriculture producer of Europe
and one of the leading industrial powers in the world. It has population of about 65,097,000.
“France becomes a country on 14July, 1789. They called their independence day as Bastille Day,
i.e. July 14. They called so because it celebrates storming of the Bastille a famous prison, during
the French Revolution, in 1789. The First Republic, called the French Republic, was founded on
22 September, 1792” (Siasoco, 2018). “France is one of the five permanent members of the UN
Security Council, since 24 October, 1945 so it plays vital role in many issues. It is also
represented in other main organs of UN as well as in the subsidiary organs” (Anonymous, 2019).
France actively participate in all fields such as peacekeeping and international security, human
rights, UN Reform, development, environment and climate change and French Permanent
Mission to the UN. “France is also a member of WTO and GATT since 1 January 1955 and 1
January 1948 respectively” (Anonymous, 2019). “The three economic challenges faced by
France in 2019 are high employment, the unemployment rate in France was 9.1% in the second
quarter of 2018, down from 9.2% in the previous period; lagging competitiveness, the nation has

had a current account deficit every year since 2006 as France imports more than exports and the
sluggish growth of France is expected to have dropped from 2.3% to 1.7% in 2018” (Downie,
2019). France has the second largest economy in EU after Germany. France ranked 21 according
GDP (nominal) per capita 2019.
DEFINITIONS
Real GDP per capita- Before knowing real GDP per capita, know the economic indicators, which
are GDP, real GDP and per capita. Gross Domestic Product is everything that is being produced
by a country in a year. Real GDP is GDP without the effect of change in price. Because of
inflation, nominal GDP increases, so real GDP gives more correct measurement when comparing
economy over time and per capita means per person. The definition of real GDP per capita is its
the measurement of total economic output divided by the number of people (population) of a
country. It is used to compare standard of living between different countries over time. The
formula to calculate real GDP per capita is-
R/C = Real GDP per capita
Where R= real GDP and C=population
Real GDP per capita is an important economic indicator because its not a measure of personal
income, it is used to make comparisons of living standard and economic wellbeing of cross-
countries.
GDP growth rate- GDP growth rate tells the growth of economy. This is done by comparing
quarter of a country’s gross domestic product to the previous quarter. Growth rate of GDP is
driven by four components of GDP. They are personal consumption, business investment,

government spending and net trade. Personal consumption includes retail sales, business
investment includes construction and inventory levels and government spending includes defense
spending and medicare benefits. GDP growth rate is important indicator of economic health as it
changes during four phases of business cycle i.e. its peak, contraction, trough and expansion.
GDP growth rate is positive when economy is expanding and when country’s economy is in
recession, the GDP growth rate is negative. To calculate GDP per capita growth rate-
GDP per capita growth rate=[(GDP per capita for previous year-GDP per capita for present
year)*100]/GDP per capita growth for previous year
Inflation rate- Inflation is the rise in the price of goods and services over time. It increases cost of
living. Inflation rate is the percent increase or decrease in price over a specific period. It tells
how price rose during the period. The main cause of inflation is demand-pull inflation. CPI
(Consumer Price Index) is the standard measure of inflation. The formula to measure inflation
rate is-
Rate of inflation=CPI(x+1)-CPI(x)/CPI(x)
where CPI(x) = initial CPI
When prices rise of goods and services, the economy is affected by it. Inflation affect the cost of
living, doing business, borrowing money and many other factors of economy. It affects the
standard of living.
Unemployment rate- It is defined as the percentage of unemployed workers. The unemployment
rate is a lagging indicator as it measures the effect of recession. The formula to calculate
unemployment rate is-

Unemployment rate = Number of unemployed person/labor force
where labor force is the sum of unemployed and employed person
Unemployment affects the society as it hurts the economy. Unemployment rate is used to
measure economy health. If unemployment increases, then the economy will become weak
because growth will be slow and spending will be small. It affects people both physically and
mentally as it leads to lack of confidence, low self-esteem and depression among the jobless
workers.
Interest rate- It is the amount of interest that is due per period, as a proportion of the amount lent,
deposited or borrowed. Total interest on an amount lent or borrowed depends on the principal
sum, interest rate and length of time over which it is lent, deposited and borrowed. The formula
to calculate interest rate is-
I/PT = R
Where I = amount paid in interest, P = principal, T = time period and R = interest rate in
decimals
To convert it into percentage, multiply it by 100. If interest rate is high, loans are expensive and
then less people can afford to borrow and if interest rate is low, then more people will borrow
money to buy things such as houses or cars.
FIVE YEAR AVERAGE PREDICTIONS
The five year average of the forecast variables are as follows-

Real GDP per capita- The five year average of real GDP per capita can be calculated by adding
the real GDP per capita of five years and then dividing by five, which is calculated out to be
45,518.08 USD.
The same method is used to calculate five year average of other variables as well.
Growth rate of real GDP per capita- The five year average of growth rate of real GDP per capita
is calculated as 1.60.
Inflation rate- The five year average of inflation rate is 1.61%.
Unemployment rate – The five year average of unemployment rate is 8.16%.
Interest rate – The five year average of interest rate is 1.50%.
Explanation of Prediction/Forecast
The above prediction of France macro-economic variables for five years starting from 2019 to
2023 in reference to real GDP, growth rate of capital, inflation rate and interest rate of France are
accurate for further conducting an appropriate forecast of France macro-economy in the future
five financial years. The prediction of macro-economic variables of France generally reflects
average five year prediction of France through analyzing France real GDP, the growth rate in
France GDP, five year calculation of increase in inflation, unemployment and interest rate of
France (Razumovskaya, et. al., 2016).
The predictions of France macro-economic variables are accurate and true as these predictions
are further supported by France Long Term Interest Rate data which usually reported and

maintained by CEIC data and European Central Bank as this data further reflects France overall
economic status in further five years. The forecast of France macro-economic variables are
regarded true and appropriate as the forecast of the variables are generally developed through
thorough analysis of France economic history, economic policy, fiscal policy, balance of
payments, trade of structure, monetary policy and exchange rate policy which further leads to
outcome of accurate forecast of France economic variables as the economic sector of a country
usually depends on economic analysis (Phan, et. al., 2018).
The prediction of France GDP growth is generated from the consideration of France economic
history as the economic history of France reflects that the country undertook control of key
industries such as energy, transportation and communication to regulate its economic activities.
Moreover, the economic policy of France generally supports the forecast of inflation, interest and
unemployment rate as the France’s economic policy decision are usually influenced by European
Union policies and targets along with the support of WTO as France is a member of the
organization.
The numbers of France’s macro-economic variables are based on solid predictions as these
predictions were IMF forecast of France through analyzing the country’s current economic
condition and policies that further enables to efficiently predict the future economic status of
France. The real GDP growth is forecasted to be 1.297% in Dec 2019 as reported by
International Monetary Fund which was developed from the analysis of GDP increase of 1.521
recorded in Dec 2018 report of France. All these data further supported to predict France’s Real
GDP growth to be 1.60% in Dec 2024 as the data of forecasted France GDP growth is developed
on the basis of France current and previous GDP growth status. Moreover, the forecast of France

GDP usually supported by International Monetary Fund and World Economic Outlook which
leads to accurate and solid predictions (KAYA, et. al., 2015).
The inflation rate of France macro-economic variables prediction is regarded as solid prediction
as the data that generated the inflation rate of France is based on the economic policy of France
advocate and impact the labor market reforms of France which further reflects current and future
inflation rate of France. The annual inflation rate in France is generally expected to be 1.1 % in
August 2019 which further enables to forecast the market expectation of France which defines
the inflation rate within the economic condition (Goncharenko, et. al., 2018). The inflation rate
of France generally developed on the basis of consumer goods price, manufactured goods prices,
seasonal rise in prices, food prices and other related consumer related prices demonstrate the
inflation rate of France. The predicted inflation rate 1.61% of France macro-variables is
developed on the basis of the historical inflation rate, economic calendar and survey consensus
from the last updated inflation rate of France.
The macro-economic variable of unemployment rate of France is predicted on the basis of the
economic condition and current and previous analysis of France unemployment rate as the data
supports the prediction of unemployment with accurate information and supported evidence
which further demonstrate the prediction as solid and accurate. According to report of Dec 2019
is predicted to be 8.823% which represent decrease from the last reported data of 9.108% in Dec
2018. This data further support to predict the unemployment rate of 8.16% in 2023 as per the
calculation of France unemployed/Labor force people in France. Moreover, the practices of
hiring and firing generally impact the unemployment rate in France which is also undertaken in
consideration while predicting unemployment rate of France after five years (Cimadomo, et. al.,
2016).

Moreover, the interest rate of France macro-variables is generally forecasted on the basis of short
term market predictions and comprehensive outlook of France economy. The prediction of
interest rate of France is regarded as appropriate and solid as it developed through effective
analysis of currency status, market analysis, government bonds and tax rate that consist the
ability to impact the overall economy of France (Aiyar, et. al., 2016).

Conclusion
This assessment is developed in the form of report which represents macro-economic country
forecast in reference of France and this assessment generally aims to determine the significance
of forecasting for determining country future economic status. This assessment includes a brief
forecast of macro-economic variables and introduction of the report along with the discussion of
background and history of France for further generation of economic forecasting of the country.
This assessment further includes definition and explanation of each macro-variables of the
country along with the demonstration of five year average predictions of each economic
variables of the country. The final part of the assessment includes a brief explanation the
predictions for supporting the relevance of the prediction along with the explanation of the
accurate data determined within the prediction process of the country.

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