Page 19 - Economic report 2018

the price of a barrel reached an average of $72, 25% higher than the price in December 2018.
Despite this situation, the IMF expects a reduction in the dollar oil price in 2019 of 4.1% on
annual average.

Economic outlooks revised In summary, despite the fact that economic
downward as risks increase. figures for the main economic areas in the first
quarter of 2019 were surprisingly positive,
the risks of a potential downturn remain. High
uncertainty over Brexit, the impact of the environmental regulations on automobiles and, above
all, rising trade tensions between the USA and China explain why the global economic outlooks
of the main international bodies were revised downward.

II. The French economy

1. The main features of economic development in 2018

The French economy slowed in 2018. Real The French economy slows down,
GDP growth was 1.7%, lower than the 2.3% reflecting the impact of street protests.
in 2017, when it reached the highest rate since
2007, according to the French National Institute
of Statistics (Insee). So, as in previous years, the French economy continued to grow less than 17
the Eurozone as a whole (1.9% in 2018). There were various random factors, such as the
social protests on the streets by the gilets jaunes, the relatively hot temperatures and school
holidays, which negatively affected domestic demand, although certain tax measures designed
to increase available income avoided greater deterioration.

GDP growth was bolstered by dynamic private investment, which benefited from the labour
reform approved in 2017, measures to boost competitiveness (CICE) and favourable financial
conditions. The foreign sector also made a fairly positive contribution to GDP growth, as
imports weakened throughout 2018, especially in services. Consumption, on the other hand,
did not show positive signs until the fourth quarter of the year, when it was influenced by
the increase in household disposable income under the budget measures taken in December
2018, and falling inflation. These positive effects on consumption will continue in 2019.

Note that the increase in the purchasing power of household disposable income (defined as
the increase in gross household disposable income after taxes and transfers, after discounting
inflation) is a very important concern in France. The insignificant gains in purchasing power
over the last decade partly explain the current social unrest, with movements such as the
gilets jaunes. Consequently, part of the government’s response to their demands has been to The external environment of the Andorran economy | II. The French economy
boost household disposable income through tax cuts.

1
Specifically, three rounds of measures were pushed: those introduced in the 2018 and 2019
budgets; the Emergency Economic and Social Measures (MUES) approved in December 2018,
and the additional measures adopted on conclusion of the Great National Debate, in which
a million and a half citizens took part, which were announced by Emmanuel Macron on 25
April 2019 (see box). According to some estimates, the first two sets of measures will make

1 See box published in the 2017 Andorran annual report.