A VIEW ON FRANCE AND ITS ECONOMY THROUGH

ECONOMIC ASPECTS
SUBMITTED BY- SRIJON MOITRA
ROLL NO-17023
BATCH- 2017-19
CONTENTS PAGE NO
INTRODUCTION
DATA METHADOLOGY
OUR FINDINGS
FIGURES AND ILLUSTRATIONS
CONCLUSION
REFERENCES

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FRANCE AND ITS ECONOMY THROUGH GDP, FDI AND IMPORTS AND
EXPORTS OF THE COUNTRY
INTRODUCTION
France has the world's 6th largest economy by nominal figures and the 10th largest
economy by PPP figures. It has the 2nd-largest economy in Europe with the UK in 3rd and
Germany in 1st. The OECD is headquartered in Paris, the nation's financial capital.
The chemical industry is a key sector for France, helping to develop other manufacturing
activities and contributing to economic growth. France's tourism industry is a major
component of the economy, as France is the most visited destination in the world. Sophia
Antipolis is the major technology hub for the economy of France. According to the IMF, in
2013, France was the world's 20th country by GDP per capita with $44,099 per inhabitant. In
2013, France was listed on the United Nations’ Human Development Index with 0.884 (very
high human development) and 25th on the Corruption Perceptions Index.
France's economy entered the recession of the late 2000s later and appeared to leave it
earlier than most affected economies, only enduring four-quarters of contraction. However,
France experienced stagnant growth between 2012 and 2014, with the economy expanding
by 0% in 2012, 0.8% in 2013 and 0.2% in 2014, though growth picked up in 2015 with a
growth of 0.8% and a growth of 1.1% for 2016, and a forecasted growth of 1.6% for 2017
and 1.8% for 2018, both forecast growth to each being the highest since 2011 (2.1%).

DATA METHADOLOGY
INFORMATION RELATED TO GDP, FDI, & IMPORTS AND EXPORTS
The French economy is slowly improving, with slow growth and slowly falling
unemployment. But expect big changes before the end of 2017, as President Macron rolls
out new legislation to rid France of cumbersome and antiquated rules that have hampered
the economy, slowed growth and kept unemployment high for many years. If, at the same
time, the UK continues moving towards leaving the European Single market (the hard Brexit
option), measures to make the French economic environment more business-friendly are
likely to be fast-tracked, to encourage firms to relocate from the UK to France.
Through this report we are going to Discuss about certain Factors and what effect that has
on the economy of the country as these are the main success factors which determines to
the common people that how their required country is performing and it also tells them
what are the areas that they require improvement to take their country to a higher level in
competition.

GDP
The (GDP) is a comprehensive scorecard of the country’s economic health. As an aggregate
measure of total economic production for a country, GDP represents the market value of all
goods and services produced by the economy during the period measured, including

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personal consumption, government purchases, private inventories, paid-in construction
costs and the foreign trade balance.
GDP consists of the total value of the nation’s production and is made up of purchases of
domestically produced goods and services by individuals, businesses and the government.
On a quarterly basis, GDP is often presented on an annualized percent basis. Most of the
individual data sets will also be given in real terms, meaning that the data is adjusted for
price changes, and is therefore net of inflation.
There are several types if GDP measurements:
 Nominal GDP is the measurement of the raw data.
 Real GDP takes into account the impact of inflation and allows comparisons of
economic output from one year to the next and other comparisons over periods of time.
 GDP growth rate is the growth in GDP from quarter to quarter.
 GDP per capita measures GDP per person and is a great way to compare GDP data
between various countries.
Importance for investors
Investors look at the growth rate in GDP as part of their asset allocation decision. They can
also compare the GDP growth rates of different countries and make decisions about
allocating their assets to stocks in these fast-growing economies. The Federal Reserve uses
the growth rate and other GDP stats as part of their decision process in determining what
type of monetary policies to implement. If the growth rate is slowing they might implement
an expansionary monetary policy to try to boost the economy.
If the growth rate is robust they might use monetary policy to slow things down in an effort
to ward off inflation. Real GDP is the indicator that says the most about the health of the
economy and the advance release will almost always move markets. It is widely followed
and discussed by economists, analysts, investors and policy makers. The corporate profits
and inventory data in the GDP report are a great resource for equity investors, as both
categories show total growth during the period; corporate profits data also displays pre-tax
profits, operating cash flows and breakdowns for all major sectors of the economy. The
biggest downside of this data is its lack of timeliness; investors only get one update per
quarter and revisions can be large enough to significantly change the percentage change in
GDP.
Strengths of the GDP:
 GDP is considered the broadest indicator of economic output and growth
 Real GDP takes inflation into account, allowing for comparisons against other historical
time periods

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 The Bureau of Economic Analysis issues its own analysis document with each GDP
release, which is a great investor tool for analysing figures and trends, and reading highlights
of the very lengthy full release

Weaknesses of the GDP:

 The data is not very timely—it is only released quarterly
 Revisions can change historical figures significantly

FDI
Foreign direct investment (FDI) is an investment in a business by an investor from another
country for which the foreign investor has control over the company purchased. The
Organization of Economic Cooperation and Development (OECD) defines control as owning
10% or more of the business. Businesses that make foreign direct investments are often
called multinational corporations (MNCs) or multinational enterprises (MNEs). An MNE may
make a direct investment by creating a new foreign enterprise, which is called a greenfield
investment, or by the acquisition of a foreign firm, either called an acquisition or brownfield
investment.
ADVANTAGES OF FDI
In the context of foreign direct investment, advantages and disadvantages are often a
matter of perspective. An FDI may provide some great advantages for the MNE but not for
the foreign country where the investment is made. On the other hand, sometimes the deal
can work out better for the foreign country depending upon how the investment pans out.
Ideally, there should be numerous advantages for both the MNE and the foreign country,
which is often a developing country. We'll examine the advantages and disadvantages from
both perspectives, starting with the advantages for multinational enterprises (MNEs).
Access to markets: FDI can be an effective way for you to enter into a foreign market. Some
countries may extremely limit foreign company access to their domestic markets. Acquiring
or starting a business in the market is a means for you to gain access.
Access to resources: FDI is also an effective way for you to acquire important natural
resources, such as precious metals and fossil fuels. Oil companies, for example, often make
tremendous FDIs to develop oil fields.
Reduces cost of production: FDI is a means for you to reduce your cost of production if the
labour market is cheaper and the regulations are less restrictive in the target foreign
market. For example, it's a well-known fact that the shoe and clothing industries have been
able to drastically reduce their costs of production by moving operations to developing
countries.

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DISADVANTAGES OF FDI
While all these advantages are well and good, the fact is that there are certain cons that
come along with them as well. Every industry, and every country, deals with these cons
differently, and are also affected in varying degrees, so they are not meant to discourage
foreign investors in any way. But every parent enterprise should be aware of these points.
Foreign investments are always risky because the political situation in some countries can
change in an instant. The investor could suddenly find his investment in serious jeopardy
due to several different reasons, so the risk factor is always extremely high.
In certain cases, political changes could lead to a situation of 'Expropriation'. This refers to a
scenario where the government can take control of a firm's property and assets, if it feels
that the enterprise is a threat to national security.
Many times, the cultural differences between different countries prove insurmountable.
Major differences in the philosophy of both the parties lead to several disagreements, and
ultimately a failed business venture. So, it is necessary for both the parties to understand
each other and compromise on certain principles. This point is directly related to
globalization as well.
Investing in foreign countries is infinitely more expensive than exporting goods. So an
investor should be prepared to spend a lot of money for the purpose of setting up a good
base of operations. This is something that parent enterprises know and are well prepared
for, in most cases.
From the point of view of foreign affiliates, FDI is ill-advised, because they lose their national
identity. They have to deal with interference from a group of people who do not understand
the history of the company. They have unreal expectations placed on them, and they have
to handle several cultural clashes at the same time.

IMPORTS AND EXPORTS

IMPORTS
Imports are foreign goods and services bought by residents of a country. Residents include
citizens, businesses and the government. It doesn't matter what the imports are or how
they are sent. They can be shipped, sent by email or even hand-carried in personal luggage
on a plane. If they are produced in a foreign country and sold to domestic residents, they
are imports. Even tourism products and services are imports.
IMPORTS AND THE TRADE DEFICIT
If a country imports more than it exports, it runs a trade deficit. Most countries would
prefer to import less and export more. In other words, a country would prefer to be a
supplier to other countries. Their leaders encourage export-driven economies.
First, it's a fast way to boost economic output, as measured by gross domestic product. That
creates jobs and increases wages. In turn, this raises residents' standard of living for

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residents. That makes them much more likely to vote for their national leaders in
democracies. In countries without an elected leader, it means there's less likelihood of a
revolution.
Second, imports make a country dependent. That's especially true if it imports commodities,
such as food, oil, and industrial materials. Then they rely on a foreign power to keep their
population fed and their factories humming.
Third, countries with high import levels must increase their foreign currency reserves. That's
how they pay for the imports. That can affect the domestic currency value, inflation, and
interest rates.
Fourth, domestic companies must compete with the imports. That can drive many small
businesses to bankruptcy.
But, if they succeed, they gain a competitive advantage. Through exporting, they learn to
produce a variety of globally-demanded goods and services.
EXPORTS
Exports are the goods and services produced in one country and purchased by citizens of
another country. It doesn't matter what the good or service is. It doesn't matter how it is
sent. It can be shipped, sent by email, or carried in personal luggage on a plane. If it is
produced domestically and sold to someone from a foreign country, it is an export.
For example, American tourism products and services can be exports.
Even though they are produced in the United States, they are exports when they’re sold to
foreigners who are visiting. If an overseas friend sends you money to buy a pair of jeans to
mail to them, that's also an export.
HOW DO EXPORTS AFFECT THE ECONOMY?
Most countries want to increase their exports. Their companies want to sell more. If they've
sold all they can to their own country's population, then they want to sell overseas as well.
The more they export, the greater their competitive advantage. That's because they gain
expertise in producing the goods and services. They also gain knowledge about how to sell
to foreign markets. Governments encourage exports. That's because it increases jobs, brings
in higher wages and raises the standard of living for residents. They become happier and
more likely to support their national leaders. Exports also increase the foreign exchange
reserves held in the nation's central bank. This is also known as Trade Surplus.
That's because foreigners pay for exports either in their own currency or the U.S. dollar. A
country with large reserves can use it to manage their own currency's value. They have
enough foreign currency to flood the market with their own currency. That lowers the cost
of their exports in other countries.
Countries also use currency reserves to manage liquidity. That means they can better
control inflation, or too much money chasing too few goods. To control inflation, they use

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the foreign currency to purchase their own currency. That lowers the supply, making the
local currency worth more.

What is 'Balance Of Trade - BOT'

The balance of trade (BOT) is the difference between a country's imports and its exports for
a given time period. The balance of trade is the largest component of the country's balance
of payments (BOP). Economists use the BOT as a statistical tool to help them understand the
relative strength of a country's economy versus other countries' economies and the flow of
trade between nations. The balance of trade is also referred to as the trade balance or the
international trade balance.

OUR FINDINGS
Now I would like to tell what I have found using the various tools graphs and tables used
and formulated.

TABLE 1
Code
NY.GDP.MKTP.CD
Indicator Name
GDP (current US$)
Long definition
GDP at purchaser's prices is the sum of gross value added by all resident producers in
the economy plus any product taxes and minus any subsidies not included in the value
of the products. It is calculated without making deductions for depreciation of
fabricated assets or for depletion and degradation of natural resources.
SOURCE
World Bank national accounts data, and OECD National Accounts data files.
TABLE 2
Code BN.KLT.DINV.CD
Indicator Name Foreign direct investment, net (BoP, current US$)
Long definition
Foreign direct investment are the net inflows of investment to acquire a lasting
management interest in an enterprise operating in an economy other than that of the
investor. It is the sum of equity capital, reinvestment of earnings, other long-term
capital, and short-term capital as shown in the balance of payments. This series shows
total net FDI. Data are in current U.S. dollars.
SOURCE
International Monetary Fund, Balance of Payments Statistics Yearbook and data files.
TABLE 3
Code
NE.EXP.GNFS.CD
Indicator Name
Exports of goods and services (current US$)
Long definition
Exports of goods and services represent the value of all goods and other market services

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provided to the rest of the world. They include the value of merchandise, freight,
insurance, transport, travel, royalties, license fees, and other services, such as
communication, construction, financial, information, business, personal, and
government services. They exclude compensation of employees and investment income
(formerly called factor services) and transfer payments. Data are in current U.S. dollars.
SOURCE
World Bank national accounts data, and OECD National Accounts data files.
TABLE 4
Code
BM.GSR.GNFS.CD
Indicator Name
Imports of goods and services (current US$)
Long definition
Imports of goods and services comprise all transactions between residents of a country
and the rest of the world involving a change of ownership from non-residents to
residents of general merchandise, nonmonetary gold, and services. Data are in current
U.S. dollars.
SOURCE
International Monetary Fund, Balance of Payments Statistics Yearbook and data files.

Below is the illustration and views regarding the above found data through graphs and other
Data.

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 GRAPH OF GDP AND FDI WITH TIME

3500000 200000
Millions

Millions
180000
3000000
160000
2500000 140000

120000
2000000
100000
1500000
80000

1000000 60000

40000
500000
20000

0 0
1950 1960 1970 1980 1990 2000 2010 2020

GDP (current US$) Foreign direct investment, net outflows (BoP, current US$)

FIGURE 1

Through this graph we can see that the GDP of France is increasing to a higher extent on a
proper trend which means that the economic condition of the country is improving and the
per capita income of the people is also at a very high level, and due to which the living
standards of the people are also popular in certain years. From the period of 1960 to 1980
the graph did not rise to a higher level but after that we can see that there was fall in GDP in
the mid 80’s and 90’s. After that it has again got hold of the increasing trend and in between
2000’s to 2010’s there is a formation of peak which means it has reached a period of boom
and this states the country is performing superbly, after that it is again moving with a
proper trend in the coming years to follow.
The other graph that can be seen here is FDI in the beginning France was not getting FDI but
after the period of 1990’s they started getting investments and in the year of 2000 there is a
huge peak which means the FDI was the highest in that year. Moreover there are certain
falls also but moreover France is showing a proper trend and denotes the Economy in a well
and proper way. Through the help of FDI France a country can get the following benefits
Capital inflows create higher output and jobs. Capital inflows can help finance a current
account deficit. Long-term capital inflows are more sustainable than short-term portfolio
inflows. e.g. in a credit crunch, banks can easily withdraw portfolio investment, but capital
investment is less prone to sudden withdrawals.

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 Recipient country can benefit from improved knowledge and expertise of foreign
multinational. Investment from abroad could lead to higher wages and improved working
conditions, especially if the MNCs are conscious of their public image of working conditions
in developing economies. This can be seen in the Case of Economy of France.

GRAPH OF FDI WITH TIME

200000
Millions

180000
160000
140000
120000
100000
80000
60000
40000
20000
0
1950 1960 1970 1980 1990 2000 2010 2020

Foreign direct investment, net outflows (BoP, current US$)

FIGURE 2

The study of FDI graph of any country speaks about a lot of things in this case the graph says
that FDI in the first place France was not getting FDI but rather after the time of 1990's they
began getting speculations and in the time of 2000 there is an immense pinnacle which
implies the FDI was the most elevated in that year. In addition there are sure falls likewise
however besides France is demonstrating an appropriate pattern and signifies the Economy
in a well and legitimate way. Through the assistance of FDI France a nation can get the
accompanying advantages
Capital inflows make higher yield and employments. Capital inflows can help fund a present
record deficiency. Long haul capital inflows are more reasonable than here and now
portfolio inflows. e.g. in a credit crunch, banks can undoubtedly pull back portfolio venture,
yet capital speculation is less inclined to sudden withdrawals. Beneficiary nation can profit
by enhanced learning and skill of outside multinational. Venture from abroad could prompt
higher wages and enhanced working conditions, particularly if the MNCs are aware of their
open picture of working conditions in creating economies. This can be found on account of
Economy of France.

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FIGURE 3

Through this graph we can see that the Import and Export of France is performing in a
proper manner and it can be seen that both the graphs are following a similar trend with
certain increase/ decrease in certain areas. Through this graph it tells that whether a
country is importing goods and not producing, or rather exporting to other countries by
doing their own production.
France having better imports as well as Exports leads to the following benefits in its
economy and these are some of the stated benefits that each and every country should try
to achieve.
Increasing your sales.
Enhancing your image in the world marketplace.
Generating economies of scale in production.
Raising your profitability.
Broadening your own intellectual horizons.
Exploring previously untapped markets.
Selling excess domestic capacity.
Insulating seasonal domestic sales by finding new foreign markets.
Outmanoeuvring competitors.

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 Improving your return on investments.
Creating jobs.
Enriching our country.

GRAPH OF GDP WITH TIME

3500000
Millions

3000000

2500000

2000000

1500000

1000000

500000

0
1950 1960 1970 1980 1990 2000 2010 2020
GDP (current US$)

FIGURE 4

Through this graph we can see that the GDP of France is increasing to a higher extent on a
proper trend which means that the economic condition of the country is improving and the
per capita income of the people is also at a very high level, and due to which the living
standards of the people are also popular in certain years. As this country France is having a
constant higher GDP growth, this would lead to
Improvements in living standards: Growth is an important avenue through which per capita incomes
can rise and absolute poverty can be reduced in developing nations. Professor Paul Collier has
argued that “growth is not a cure-all; but the absence of growth is a kill-all.”

More jobs: Growth creates new jobs – although the pattern of employment will also change

The accelerator effect of growth on capital investment: Rising demand and output encourages
investment in capital – this helps to sustain GDP growth by increasing LRAS

Greater business confidence: Growth has a positive impact on profits & business confidence

The “fiscal dividend”: A growing economy boosts tax revenues and generates the money to finance
spending on public and merit goods and services without having to raise tax rates

Potential environmental benefits – as countries grow richer, they have more resources available to
invest in cleaner technologies. And, as nations develop, energy intensity levels fall

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Benefits from Growth driven by Technological Change

Productivity growth Increase in GDP per worker Lower unit costs Higher wages Higher profits New
Goods and Services Lower real prices Consumer welfare gains Improved living standards Improved
health Healthy life expectancy rises Labour force expands Increased productivity

CONCLUSION
After looking into our findings and observations we can see that the Economy of France is
performing quite well in all the various sectors, and as the country is performing in all the
various fields they can maintain their Global ranking of 2 nd position in Europe as compared
to other nations. The GDP is showing the condition of the country very well and so per
worker Lower unit costs is there, followed by Higher wages and Higher profits and also New
Goods and Services are available to them at Lower real prices. FDI being more people are
investing in the country and getting their respective returns, and hence the reputation of
France is also increasing and lastly through Import and Export, the level of Balance of trade
can be seen and they are obtaining benefits from each of the given fields and developing
themselves still to attain a higher success rate as a perfect country with perfect economy.

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