Why France has a record trade deficit

by time news

One (sad) record chases the other. The balance of trade in goods ended in the red again in 2022. The energy crisis went through this, which saw gas and oil prices double… like the deficit which plunged to 164 billion euros. euros against 85 billion euros in 2021, the previous record. “Unfortunately, we are in the continuity of previous years”in the words of Olivier Becht, Minister for Foreign Trade, on Tuesday 7 February, recognizing “an extremely large deficit”.

On gas alone, the bill was multiplied by 3.5 (+248%) to 59 billion euros. Result, an overall energy bill more than doubled, to 115 billion euros in 2022. That year will have been marked by many headwinds, argues Olivier Becht: the soaring prices of energy and materials raw materials – metals and agri-food in particular – was combined in the fall with maintenance operations for the tricolor nuclear fleet. France, traditionally an exporter, thus found itself forced to import electricity… at a high price.

scissor effect

Overall, France suffered from a scissor effect: the price of imports increased by almost 30% in value, while French exports, less sensitive to energy prices, progressed less (+ 18%).

And then, French companies have also suffered from the depreciation of the euro against the dollar, by 11% last year, and tensions in supply chains. All this against a backdrop of a slowdown in global activity, which certainly increased by 5%, but less than previously.

It prevents, “of this 164 billion deficit, half is linked to structural factors”, recognizes Olivier Becht. Factors (too) well known, and for good reason: France has been in chronic deficit for twenty years in its trade in goods with the rest of the world, the last trade surplus dating back to 2002 according to INSEE figures.

Progress of exporting SMEs

In question, in particular, a rampant deindustrialization since the 1990s. The efforts undertaken since the five-year Hollande period in particular (responsibility pact) to recover from the slope are bearing fruit, slowly… Admittedly, industrial companies are no longer destroying jobs, and the France is now recording more site openings than site closures. “But the examples remain very much in the minority”, points out Christopher Dembik at Saxo Bank.

Another obstacle: SMEs are still too weak in exports. There is still a lot of work to improve their international support, however points out a professional who supports SME managers. “Despite efforts to offer a ‘one-stop shop’ for exports, there are still too many contacts. And the advice given is sometimes contradictory, even within the same structure! »

Sign of hope: there are almost 145,000 exporting SMEs today, compared to 130,000 a few years ago. Other encouraging sectors, the automobile, whose exports have almost returned to their 2019 level, aeronautics and space, perfumes and cosmetics, agricultural products, “including cereals and livestock products, insist Olivier Becht, it therefore goes beyond wines and spirits”.

Increase in investments

There is an indicator that must also be analyzed with precision: the increase in imports. Against a background of sluggish household consumption, they are probably due to a good momentum in business investment, an encouraging trend for the coming months.

The Rexecode institute highlights other encouraging news: French exports to the rest of the euro zone have increased, thus improving French market shares between 2021 and 2022 (+ 0.3 points for goods and 0.2 for services).

Still in the good news department, France is posting an unprecedented surplus in its trade in services (+ 50 billion, after + 36 billion in 2021), in particular thanks to tourism and transport. The first benefited from a post-Covid catch-up effect (+ 14 billion), and the second from a sharp rise in prices linked to tensions in the supply chains. The French company CMA-CGM thus recorded unprecedented results, which represent almost all of the “transport” surplus. But it is “an exceptional year linked to exceptional circumstances”still tempers Christopher Dembik.

Everywhere, the “big dive”

The balance of income, which includes financial services, was also in surplus, up to 31 billion euros, Paris thus confirming to have benefited, in part at least, from the consequences of Brexit on the City of London.

But overall, the balance of goods, services and income shows a current account deficit after a surplus last year. “It’s the big plunge in trade balances everywhere”wants to put Minister Olivier Becht into perspective, stressing that all of our European neighbors have also borne the brunt of soaring energy prices.

The German trade surplus, for example, fell by 56% last year, also weighed down by the cost of energy-related imports. It nevertheless remains largely in the green, very far ahead of France, at 76 billion euros.

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