Just as the train strikes of the summer have abated, President Macron is facing fresh protest and social unrest. This time it is linked to a planned increase in fuel duty, especially on diesel cars, as well as cutting France’s dependency on coal (to zero by 2022) and nuclear power (by 50% by 2035). At face value, one might expect this to be met with more sympathy, as much of the world strives to be environmentally friendly. Macron, in particular, will want to be seen as serious about tackling climate change, having lost the popular Nicolas Hulot as Environment Minister over the summer.
However, to the French public, this is yet another reform that makes them feel worse off. The yellow-jacket-wearing protesters are also a stark reminder that Macron’s economic reforms will be resisted at best and met with hostility at worst. Therefore, in the near term, the reforms may further damage consumer sentiment, which could lead to more volatility in quarterly growth numbers.
We still believe that President Macron’s economic reforms will pay dividends in the form of raising potential growth in the coming years. However, as Macron's popularity rating is falling sharply, there is a risk that he will be forced to backtrack on his reform agenda going forward, especially as he wants to avoid fueling support for the populist opposition ahead of the EU parliamentary elections.