Economic success would be necessary for President François Hollande to reduce unemployment and to legitimate his 2017’s re-election bid (and people also want that growth badly – for obvious reasons). But outstanding economic growth remains a mere dream. As it recently turned out, GDP growth (on a year-on-year basis) was exactly zero in the second quarter, while tourism is also suffering from the effect of terror attacks.
Analysts consider second quarter’s zero growth disappointing, especially after a satisfying first-quarter growth of 0.7%. Analysts did not expect such a decline, though some backlash was indeed expected. It is possible, that in addition to the threat of terrorism, trade union protests and the blockades of oil refineries also played a decisive role in this disappointing dataset. Household consumption, exports, imports and corporate investment have dropped. The UEFA Euro 2016 did not significantly improve the situation of the tourism sector either, which is especially surprising.
Tourism is suffering because of terrorism and has been for a long time. Nice Flight bookings decreased by 57% in mid-July compared to the same period of the previous year. Arrivals by air suffered a 8.8% slump, while flight reservations to France following the 14 July Nice attack were down by a whopping 20 percent. It seems that the UEFA Euro 2016 was not able to counterbalance the effects of fear. This is a significant problem for France – the most important tourist destination of the world -, because tourism serves as an engine for France’s economy.
François Hollande has no reason to be happy with these figures. The government did not hide its disappointment either and blamed weak growth figures on oil refinery strikes. However, the 1.5% annual GDP growth forecast for 2016 was maintained by the Cabinet.
Everything is politics, economics is politics also. Moderate growth is obviously less likely to reverse unemployment numbers (and yes, unemployment rose again in June). Decreasing unemployment is presented as a pre-condition for a re-election bid by Hollande. Thus, from now on, his “things are going better” slogan will not sound so good. Next year’s tax cuts, tied to potential economic growth, are also becoming less likely. These circumstances do not exactly forecast a successful 2017 election.