French economy ends 2025 with modest growth slowdown

PARIS, Jan 30 (Reuters) - France's economy ⁠grew modestly ⁠in the ‍fourth quarter of 2025, slowing after a strong summer rebound as slightly softer domestic demand and a rundown in business inventories ‍weighed on activity, preliminary data from the INSEE statistics office showed ​on Friday.

Quarterly growth eased to 0.2% from 0.5% in the third quarter when the euro zone's ​second‑largest economy surprised on the upside. The fourth‑quarter reading matched both INSEE's forecast and economists' expectations, according to a Reuters poll.

Over the course of 2025, the economy expanded 0.9%, outperforming ​the 0.7% assumption used in government budget planning. The stronger‑than‑expected performance increases the chances that the fiscal deficit will come in slightly below the ​5.4% of gross domestic product that is currently projected.

The economy held up better than many forecasters had anticipated, ‌despite months of political turbulence in a deeply divided parliament that weighed on sentiment among households and companies.

"We're off to ​a good start in 2026," Finance Minister Roland ⁠Lescure said on TF1 television. "I hope we'll get at least the 1% (growth) we're expecting."

Some political uncertainty is expected to ease ‌as Prime Minister Sebastien Lecornu prepares to push the 2026 budget through parliament on Friday, ending a protracted standoff over fiscal policy.

Opposition parties are expected to file no confidence ‌motions against his government, but they are unlikely to pass.

Prospects for a strong rebound remain ‌limited, economists say. The budget "remains unfavourable to businesses" and higher taxes could curb investment and job creation, ING economist Charlotte de Montpellier said in a note.

She described the overall outlook ‍as "modestly positive," citing early signs of improving business confidence, though a strong euro could hinder exports.

In the fourth quarter, household ⁠spending and investment boosted overall domestic demand, which contributed 0.3 percentage points to the growth rate.

With exports growing and imports falling, foreign trade added 0.9% to the growth rate while a drawdown in corporate inventories subtracted 1%.

(Reporting by Alessandro Parodi, editing by Inti Landauro and Thomas Derpinghaus)

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