Analysts Fear Paris Attacks Could Hurt French Economy

The attacks in Paris left a cloud of uncertainty in the air, and spending and tourism may grind to a halt, according to AFP. Before the tragedy, France announced a return to growth in the third quarter, but economic activity has slowed since Saturday.

The attacks in Paris left a cloud of uncertainty in the air, and spending and tourism may grind to a halt, according to AFP. Before the tragedy, France announced a return to growth in the third quarter, but economic activity has slowed since Saturday.

Many express concerns over the state of the French economy after the terrorist incident, but history shows otherwise. For instance, France’s economy rebounded after the Charlie Hedbo attacks in January, and the U.S. economy improved after the September 11 attacks, as Americans became more united. However, each circumstance is different, and a sluggish period could spell further consequences for France’s already fragile economy.

France underwent 0.6 percent growth in Q1, but no expansion followed in Q2. Q3 growth showed a rebound, and finance minister Michel Sapin expects the economy to grow 1.1 percent in 2015. Officials also expect the 2016 economy to grow by 1.6 percent, but France still has a high unemployment problem, with one out of every 10 person not working. President Francois Hollande promised not to seek another term in 2017 if the unemployment situation does not improve.

The economy will continue to grow, but it will not be enough to place France on a stable path to prosperity, and the situation could grow worse as businesses remain on the fence. Moreover, the tourist sector could face a heavy impact, as 84 million people visit Paris each year. Tourism comprises 8.0 percent of the nation’s GDP. Many worry over the image of Paris as a destination that attracts terrorist activity, scaring away visitors in the process.

In addition, restaurant and hotel owners fear losing repeat business because of regulars who arrive each year for annual events. With that, many in the tourist sector foresee a period of slow growth for the next few weeks but expect things to improve over time, and France has numerous destinations throughout the country that will prop up the tourist sector.

Regarding French citizens, economists are concerned that more consumers will save instead of spend. Investors and business community leaders may take the same attitude, but many investors currently show more concern about the impact of China on the markets rather than fallout from the attack.

Analysts also highlight a potential climate of fear that could fuel a more closed society, turning people away, and the long-lasting uncertainty may cause new graduates to leave France and work elsewhere. No one is certain about the economy’s future, but the solidarity among French people may be enough to bring the economy back to solid footing.