Macroeconomic analysis of France - Research Paper Example

This has been accredited to the global financial crisis that has affected Finance as well; although it is difficult to identify the exact nature and extent of impact that the financial crisis had had on GDP (Banque De France, 2008). There are other factors that influence gross domestic product of a country. These include trade balance (exports and imports), public debt, consumption, expenditure and savings in the economy. The above figures show that there has been continuous growth in imports for the country but it is not matched with growth in exports.

As a result, the trade deficit has been increasing over the years. Imports for 2008 were almost 33% of GDP; whereas exports were 30.36% of GDP. This has also affected the reducing growth in the GDP. As per the latest report published by INSEE, the consumer price index (CPI) for all households, which is the measure generally used to determine inflation, was 1% in March 2009, as opposed to 0.8% last year which shows an increase of 0.2% (INSEE, 2009). The increase in the consumer price index from 2008 was mainly due to the fact that prices for clothing and footwear increased due to the winter season.

Although their effect was somewhat compensated due to the decrease in prices of communication services, energy and transport services (INSEE, 2009). As a general rule, the greater the consumption by government, the higher will be the economic activity in the country; thus leading to higher GDP. Government consumption for France over last three years is shown in the following table (OECD, 2009): The above table shows that government consumption has been growing at a constant rate for the last three years.

However, considering the financial crisis, the government consumption growth rate is expected to decline in 2009 by 0.8% (absolute amount of government consumption in 2009 is expected to be 429.2 billion Euros). Moreover, government consumption in 2010 is expected to increase by 0.7% of 2009 (OECD,