French growth slows as ‘yellow vest’ protests take toll

PARIS (AFP) – French economic growth slumped in 2018 as consumer spending tapered off toward the end of the year, the victim of violent anti-government protests that kept many shoppers at home ahead of the holidays, statistics office INSEE said yesterday.

GDP expanded by just 1.5 per cent last year compared to the 2.3 per cent growth chalked up in the 2017 after Emmanuel Macron swept into the presidency with his pledge to revive the French economy through pro-business reforms.

The 2018 outcome fell short of the government’s growth target of 1.7 per cent and economists warn of gathering risks that could jeopardise a recovery in 2019.

INSEE said consumer spending was stagnant in the fourth quarter after edging up 0.4 per cent in the previous three months, as the “yellow vest” protests over high fuel taxes and low living standards sparked widespread disruption.

Dozens of shops were ransacked and cars burned in Paris and other cities during the weekly Saturday protests that erupted in mid-November.

Road blockades also kept goods and supplies from reaching stores and businesses, causing production bottlenecks and shortages.

Even a heavy reduction in residential taxes for millions of French households which came into effect in late 2018, part of Macron’s pledges to boost spending power, was not enough to entice the French to shop more.

Household spending slumped, falling 0.4 per cent in the final three months of the year, INSEE said, while growth in investment by companies slowed to 2.9 per cent from 4.7 per cent in the third quarter.

The government, which faces increasing difficulties keeping public spending under control and the budget deficit within European Union (EU) limits, tried to see the glass as half-full rather than half-empty.

“Despite the deterioration of the international environment and the yellow vest movement, French growth is solid,” Finance Minister Bruno Le Maire said on Twitter. “Our policies are paying off,” he added.

But most of INSEE’s main readings showed a French economy facing increasing headwinds, not least the trade tensions between Europe, China and the United States (US) under the protectionist policies of President Donald Trump.

French exports rose 3.1 per cent last year after a 4.7 per cent jump in 2017, while industrial production gained 2.0 per cent after 2.6 per cent as construction and manufacturing lost steam.