France's economy grew modestly in the fourth quarter of 2025, slowing after a strong summer rebound as slightly softer domestic demand and a rundown in business inventories weighed on activity, preliminary data from the INSEE statistics office showed on Friday.
Quarterly growth eased to 0.2% from 0.5% in the third quarter when the euro zone's second‑largest economy surprised on the upside. The fourth‑quarter reading matched both INSEE's forecast and economists' expectations, according to a Reuters poll.
Over the course of 2025, the economy expanded 0.9%, outperforming the 0.7% assumption used in government budget planning. The stronger‑than‑expected performance increases the chances that the fiscal deficit will come in slightly below the 5.4% of gross domestic product that is currently projected.
The economy held up better than many forecasters had anticipated, despite months of political turbulence in a deeply divided parliament that weighed on sentiment among households and companies.
"We're off to a good start in 2026," Finance Minister Roland Lescure said on TF1 television. "I hope we'll get at least the 1% (growth) we're expecting."
Some political uncertainty is expected to ease as Prime Minister Sebastien Lecornu prepares to push the 2026 budget through parliament on Friday, ending a protracted standoff over fiscal policy.
Opposition parties are expected to file no confidence motions against his government, but they are unlikely to pass.
Prospects for a strong rebound remain limited, economists say. The budget "remains unfavourable to businesses" and higher taxes could curb investment and job creation, ING economist Charlotte de Montpellier said in a note.
She described the overall outlook as "modestly positive," citing early signs of improving business confidence, though a strong euro could hinder exports.
In the fourth quarter, household spending and investment boosted overall domestic demand, which contributed 0.3 percentage points to the growth rate.
With exports growing and imports falling, foreign trade added 0.9% to the growth rate while a drawdown in corporate inventories subtracted 1%.
(Reporting by Alessandro Parodi, editing by Inti Landauro and Thomas Derpinghaus)
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