Trade deficit breaks records, weighed down by energy bills
AFP, published on Friday, August 05, 2022 at 14:18
France’s goods trade deficit continued to worsen sharply in June and the first half of the year, reaching record highs on the back of energy bills, undermining government efforts to reduce it.
French foreign trade statistics have posted record deficits this year, weighed down by the explosion in energy prices since the war in Ukraine broke out.
The half-year balance sheet hits a deficit of 71 billion euros after a deterioration of 13.3 billion euros in June, French customs said on Friday, two historic records.
Crossing the symbolic mark of 100 billion euros annual deficit at the end of December seems inevitable. Over 12 rolling months, France already has a trade deficit of 121.9 billion euros. The worst annual trade deficit in history dates back to last year at 84.7 billion euros, while the last French surplus was recorded twenty years ago.
New ministerial delegate Olivier Becht, who was appointed to foreign trade portfolio last month to replace Franck Riester, admitted “a very significant deterioration in our trade deficit” during a conference call on Friday.
– electricity bill –
But, he said, the energy bill “alone explains the deterioration.” Energy prices weighed on the half-year import bill by 48 billion euros, compared with 27 billion euros in the second half of 2021. The phenomenon is exacerbated by the current weakening of the euro against the dollar.
“The energy bill is going up, there’s not much we can do,” said Maxime Darmet, an economist at Allianz Trade, in an interview with AFP. “But things are not improving on the industrial balance sheet side,” he continues, citing aircraft shipments that are struggling to pick up again and the loss of market share in the automotive equipment sector.
“These numbers show that the downward trend is still there, accelerated by the pandemic,” said the economist.
Excluding energy and military equipment, the trade deficit peaked at 36 billion euros in the first six months of the year, roughly in line with the second half of 2021 but well above the level of the past decade.
France’s declared reindustrialization efforts, which have become a government priority due to severe disruptions in global supply chains and the economic fallout from the war in Ukraine, are struggling to translate into trade balance numbers.
“Reindustrialisation will take at least a decade,” Olivier Becht said on Friday, adding that France “is coming out of thirty years of deindustrialisation”.
For OFCE economist Mathieu Plane, the current figures raise the question of French competitiveness without costs, “research, innovation, training, many things that do not go only through taxation”, the latter being gradually reduced by supply since 2012 Politics and stand for a total of tax cuts “from 60 to 70 billion euros per year”.
“It might be a lot worse if we didn’t have these devices, but we haven’t managed to regain market share,” says the economist.
Rare positive point in the foreign trade statistics is the very good performance of services, which registered a record surplus of 34 billion euros compared to 23 billion in the previous half year. These were driven by transportation, travel and financial services.
The export sectors that smile in the foreign trade statistics include the food industry and the pharmaceutical industry.