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France: Towards a EUR 100 bn trade deficit in 2022?

2/11/2022

France has registered a record trade deficit in 2021, about EUR 85 bn. Oil prices were the main trigger of the deterioration compared to 2020. However, in the medium run, the main structural evolution is the deepening of the deficit on industrial goods: by about EUR 25bn during the last 10 years to 50bn in 2021. In 2022, the trade deficit should reach EUR 100 bn: a sizeable burden on French’s purchasing power.

Stéphane Colliac

TRANSCRIPT // France: Towards a EUR 100 bn trade deficit in 2022? : February 2022

France has experienced its worst trade deficit in 2021, at EUR 85bn. Compared to 2020, its deterioration is mainly the byproduct of higher oil and gas prices. As a result, the energy deficit has increased by EUR 18bn in 2021.

The record overall trade deficit was also driven by the vanishing trade surplus on aeronautics during the last two years: the shortfall reached about EUR 15bn. In 2021, the exports of the sector were 40% below their pre-Covid level.

However, one can’t see the forest for the trees. France has seen a steep deterioration of its industrial goods deficit during the last 10 years. On all industrial goods (including aeronautics), the deficit has reached about EUR 50bn in 2021, against EUR 25bn in 2011. The loss remains equivalent to EUR 20bn even after excluding the shortfall driven by aeronautics.

Today, when domestic demand increases, this means a higher import content compared to some years ago. In 2021, household demand for electronics and electrical equipment has increased. In parallel, the manufacturing sector faced higher demand and had to import more intermediate goods in order to increase its output: mainly plastics and metals.

This overall landscape will not be easily reversible, as industrial production is resulting from location choices made for several years. Moreover, the energy trade deficit should increase further as average energy prices should be higher in 2022 compared to 2021. By the way, France is likely to reach a EUR 100bn trade deficit in 2022. This figure is largely driven by a price effect, which means a burden on French’s purchasing power in 2022.

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