France orders €1.3bn in extra cuts as growth falls behind European neighbours

Paris has announced further spending curbs as growth weakens, unemployment rises and heatwaves take their toll, with France forecast to expand at barely a third of the rate of some of its neighbours this year

France has announced another €1.3bn of spending cuts as the government forecast economic growth of just 0.5 per cent this year amid pressure from higher energy costs, extreme weather and weaker domestic activity.

Economy and finance minister Roland Lescure said growth was expected to recover to 1.0 per cent in 2027, while inflation was forecast at 2.1 per cent this year before easing to 1.8 per cent next year.

The figures come as France’s national statistics agency warned that the country was falling markedly behind its European neighbours.

INSEE expects the French economy to grow by only 0.4 per cent in 2026, around a third of the rate forecast for its eurozone neighbours and the UK, and said France would be the only major advanced economy where growth slowed significantly this year.

The economy contracted by 0.2 per cent over the winter before stagnating in the spring, with weaker public works activity, deteriorating employment, subdued wages and tighter fiscal policy weighing on growth. 

Summer heatwaves are estimated to have wiped 0.1 percentage points from annual growth, largely through lower agricultural production.

The government said the latest savings were needed to fund emergency support for farmers while keeping public spending under control.

They include €500m of cancelled spending commitments and €783m of additional spending freezes across government departments.

Paris had already curbed state spending by €4bn and frozen general relief measures, avoiding a further €2bn of expenditure, following the energy shock caused by conflict in the Strait of Hormuz.

INSEE warned that unemployment could reach 8.6 per cent by the end of the year, with the economy losing 52,000 salaried jobs, while household purchasing power is expected to fall by 0.4 per cent.

Inflation reached 2.4 per cent in August and INSEE expects it to rise to 2.9 per cent by the end of the year as higher gas and energy prices feed through into manufactured goods and services.

The government said further measures to rein in spending would be announced in the coming weeks across both the state budget and social security system.

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_{Main image: French economy minister Roland Lescure unveils the government’s revised forecasts, putting 2026 growth at 0.5 per cent and inflation at 2.1 per cent. Image: French Ministry of the Economy and Finance}