France's economy saw a slight decline in Q4 last year as the impact of the Paris 2024 Olympic Games faded, according to INSEE's quarterly GDP report released on Thursday.

The eurozone's second-largest economy contracted by 0.1% in the final quarter of 2024, following an unrevised 0.4% growth in the third quarter, the preliminary data from INSEE revealed.

The Olympic Games boosted French growth in the third quarter, according to INSEE, driven by sales of household services, tickets, and broadcasting rights.

Domestic demand continued to support French GDP in the fourth quarter, though its impact was less significant than in the previous period, Reuters news agency reports.

Foreign trade once again had a negative effect in the final quarter of the year, as exports fell and imports increased.

Inventories had a minor negative impact on GDP in the fourth quarter, following a mildly positive contribution in the previous quarter.

Furthermore, a Reuters poll of 30 economists had predicted no growth in GDP for the fourth quarter, with forecasts ranging from a decline of 0.2% to an increase of 0.3%.

Whilst INSEE reported that, on average, GDP grew by 1.1% in 2024, following a 1.1% increase in 2023 and a 2.6% rise in 2022.

However, political gridlock has plagued Paris since the snap parliamentary elections in June and July. The far-left and far-right both achieved strong results in their respective rounds of voting, leading to disputes in the National Assembly over who should lead. Ultimately, President Emmanuel Macron appointed a conservative government in September, which created tensions with political factions on both the left and right.

Dependent on far-right support, then-Prime Minister Michel Barnier’s centrist government was susceptible to opposition from both ends of the political spectrum. After his 2025 budget plan to reduce the deficit was rejected, the government was removed in a no-confidence vote in December.

A new government led by Prime Minister François Bayrou was established in December, and he managed to survive a vote of confidence in January, as both the far-right National Rally and the Socialist Party refused to support the motion brought by the far-left, CNBC reports.

The 2025 budget has yet to be approved, and Bayrou has already been compelled to make concessions to the left to secure backing for his fiscal plans. This includes reopening the contentious issue of pension reform and agreeing to additional spending and job creation in the health and education sectors.