Claire d'Izarny
You are Economist in the OECD Team of BNP Paribas group and in this audiobrief you are going to talk about the french trade deficit: France is relatively deindustrialised but investing.
So Stéphane first question: What does the French trade balance cover and why is this an interesting topic?
Stéphane Colliac
The French trade balance synthesises exports and imports in goods. It is published monthly by customs. A negative figure, as in the case of France, means that imports are higher than exports and the country therefore has a trade deficit. This trade deficit, which France is recording, changes over time.
First, France is a net importer of hydrocarbons. France thus saw its deficit increase with higher oil prices, as in 2022, and decrease when that prices fall as in 2023.
However, the increase in the trade deficit is also structural, reflecting the widening deficit on trade in manufactured goods, i.e. excluding energy excluding refined oil and excluding unprocessed agricultural products. This reflects the more pronounced deindustrialisation of France, whose industry is smaller than in Germany or Italy.
Thus, production in France fell sharply from what it was twenty years ago in sectors such as motor vehicles, metals, plastics&rubber and even agri-food (excluding beverages) in favour of increasing imports, which generated increasingly large sectoral deficits.
Claire d'Izarny
With all this in mind, what can be said about the balance of trade in 2023?
Stéphane Colliac
Its deficit decreased slightly below EUR 100 billion to EUR 99.6 billion in 2023, after a record EUR 163 billion in 2022. In fact, the difference between 2022 and 2023 is explained by unfavourable exceptional items in 2022 that normalised in 2023.
Oil prices fell, while electricity and refined oil production rebounded, as in 2022 the latter two suffered from the closure of some nuclear plants for maintenance and the strike in refineries.
In addition, imports of intermediate goods were exceptionally high in 2022 in order to reduce shortages and then normalized in 2023, as shortages disappeared, contributing to the reduction of the trade deficit. These intermediate goods relate to chemicals, metals, plastics&rubber or wood&paper.
However, the overall 2023 trade deficit is the highest in history if the 2022 deficit is excluded from the comparison. One explanation is the deficit on manufactured goods. It increased significantly, from EUR 36 billion in 2019 to EUR 55 billion in 2023.
Claire d'Izarny
How can we explain this deterioration?
Stéphane Colliac
Firstly, because France invests, and particularly French companies. Their investment increased in value by 24% in 2023 compared to 2019, supported by the various plans, France Relance or France 2030, but above all by the needs arising from digital and ecological transitions.
Overall, France needs more capital goods to support this investment. These goods are largely not produced in France and have to be imported. This therefore increases the trade deficit, but for a good reason, because France is investing.
In addition, France has seen a marked increase in its deficit on cars, both vehicles and car suppliers. This is mainly due to electrification, which has driven growing import of vehicles produced abroad (notably in Central Europe or China), but also of equipment (including batteries) for which France has a development plan, but mainly with a production phase expected in the coming years.
For the next few years, the trade deficit can therefore be expected to remain close to EUR 100 billion. Indeed, France will continue to invest and will need imports to do so. However, on a longer horizon, when new production capacity will come into force, this deficit may then fall.
Claire d'Izarny
Thank you Stephane for your explanation of the french trade deficit.
Thank you to our listeners and visit our website, where you will find analyses from our economic research team throughout the year.
See you soon.
