France

THE CURRENT STATE OF DEMOGRAPHICS AND DEBT IN FRANCE

France stands out among advanced economies for the size and scope of its welfare state. Public pensions and healthcare are central to the French economic model and have long shaped both fiscal outcomes and political expectations. While this system has provided extensive social protection, it has also required high public spending and budget deficits. These pressures intensified following the Global Financial Crisis and again during the COVID-19 pandemic, leaving France with elevated levels of government debt. 

Demographic trends are now amplifying these fiscal challenges. France is experiencing rapid population aging as larger cohorts move into retirement, while the growth of the working-age population has not been sufficient. This dynamic is placing increasing strain on the pension system and raising questions about its long-run sustainability. Attempts to address these pressures through pension reform have proven politically difficult. Most notably, efforts in 2023 to raise the retirement age triggered widespread protests, ultimately limiting the scope of reform. As age-related fiscal pressures rise and political constraints remain, France faces growing difficulty in managing its fiscal trajectory in response to demographic aging. 

MODEL EVALUATION

To determine the predictive accuracy of each model, a robustness test was conducted. All models were trained exclusively on data through 2013, and then tasked with forecasting French government debt levels from 2014 to 2023 using the actual demographic changes that occurred during those years. These predictions were then compared to the actual 2023 debt level. 

The results indicate meaningful differences in out-of-sample performance across model specifications. Models trained on data beginning in 1990 generally outperform those trained starting in 2004, with the 1990 Global Sample producing the lowest forecast error, followed by the 1990 OECD Member and Old Economies models. In contrast, several 2004-based models substantially overpredict France’s 2023 debt level. This pattern likely reflects the influence of crisis-era behavior within the 2004 based training samples. Models estimated over periods where a significant portion of the sample includes the Global Financial Crisis appear to overweight short-run crisis responses, leading to inflated long-run debt projections. By contrast, models trained on longer historical samples are better able to capture French debt dynamics outside of crisis conditions. As a result, the stronger performance of the 1990-based models provides greater credibility for long-run forecasting. 

INTERPRETATION

French public debt is projected to rise significantly over the coming decades across all model specifications, reflecting the growing fiscal pressures of its aging population. The consistency of this pattern across models suggests that demographic structure, rather than short-term shocks, is the primary driver of France’s long-run debt dynamics. Unlike some advanced economies, France enters this period with a large and deeply entrenched welfare state, particularly within its extensive pension system. The forecasts therefore highlight the difficulty of stabilizing public debt in an environment where effective fiscal policy is politically difficult. As a result, even moderate demographic aging translates into sustained fiscal pressure. 

These projections assume the absence of future shocks comparable to a major financial crisis, pandemic, or large-scale conflict. Additional shocks would likely accelerate debt accumulation given France’s already elevated baseline debt levels. However, the forecasts also assume no major pension reform, so meaningful reform would likely reduce the rate of debt accumulation. Taken together, the forecasts suggest that France faces a persistent erosion of fiscal space, with long-term debt sustainability increasingly shaped by the interaction between demographic trends and political forces.