Page 23 - Economic report 2020

labour adjustment was made by reducing the
UNEMPLOYMENT RATE IN FRANCE working hours rather than reducing numbers
As % of active population Chart 2.2 of staff – unlike in previous crises – explains

the rapid recovery of the labour market in
2021 and 2022.

Although the direct exposure of France to energy
supplies from Russia is limited, wholesale energy
prices increased from the start of the war and
influenced the rest of the prices in the basket
of consumer goods, with added pressures from
the impact of the European embargo on Russian
oil in 2023, the major workforce shortage and
the minimum wage indexation. The result was
f: European Commission forecasts (May 2023).
a rise in inflation (general and underlying) and
Source: Eurostat.
in wages.

On the one hand, inflation saw an upward trend throughout the year, reaching a high of 7.1%
in October and November, figures that had not been seen since the mid-eighties. On annual
average, consumer prices in France increased 5.9% in 2022, a percentage that was much higher
than that of 2021 (+2.1%) and also than the medium-term target of the ECB (+2.0%). Equally, the
upward trend in prices was less than in the Eurozone overall (+8.4%). Underlying inflation, which
better reflects the trend in core prices by excluding the volatile components (unprocessed food
and energy), saw positive progress but more moderate that general inflation (+3.8% on annual
average and +5.4% in December).
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On the other hand, nominal wages per worker increased by 5%, a percentage that is higher than
the 4.4% European average. This rise is much greater than that of labour productivity in businesses
(+0.2%), which led to a loss of competitiveness of French businesses (in terms of real unit labour
costs). Note that, on average in 2022, the purchasing power of employees slowed (+0.1% after
+3.1% in 2021) in an unprecedented inflationary context. So, the increase in households’ gross
disposable income was similar to that in consumer prices, due to the support measures put in
place in the second half of 2022 and also the dynamism in income from work and property.

The French government implemented important measures in 2022 to soften the impact of
rising prices of energy and basic products. For example, it temporarily limited gas and electricity
charges; increased energy consumption vouchers for the poorest households, and made a one-
off, means-tested transfer to 38 million people.
The executive government also temporarily cut
fuel tax; raised special conditional subsidies for THE FRENCH PUBLIC DEFICIT
businesses, and extended the loans guaranteed As % of GDP Chart 2.3
by the state. In July, faced with persistently
high rates of inflation, the government
approved another package of measures to
protect citizens’ purchasing power, which External environment of the Andorran economy | II. French economy
included the revaluation of pensions and other
benefits by 4%, and 100-euro food cheques
for vulnerable families. On the other hand,
the implementation of the NextGenerationEU
plan is providing support to growth in France,
which will receive 40,000 million euros in f: European Commission forecasts (May 2023).
European subsidies. Source: Eurostat.