Political repercussions of the protests may complicate planning into 2024
Ongoing protests in France should serve as a reminder to MNCs that in the current high-inflationary environment in which households are experiencing economic hardships, bouts of unrest remain unpredictable and are likely to add additional strain on tactical planning and supply chains. Additionally, such events are likely to add the policy unpredictability, which may significantly complicate strategic planning in 2024.
The unrest comes on the back of the anti-pension reform protests, and despite not having a lasting macro impact on the economy, it is likely to complicate tactical planning the short term. MNCs should monitor events closely, especially in the context of the government’s response and remain vigilant in light of increased risks of similar events.
Overview
- The shooting of a 17-year-old during a police car stop sparked a new wave of public discontent and violence, as protesters stormed the streets to express discontent with the police and the government.
- In response, the government mobilized 45,000 policemen to contain the protests.
- Total arrests over the last week totaled 3,354, with over 1,300 arrests on June 30 alone.
- Arrests on Sunday dropped to 157 from 773 on Saturday, as the unrest began to abate.
- Preliminary estimates put the cost of destroyed property and damages at around EUR 100.0 million, but the actual number is likely much higher.
Our View
The shooting of 17-year-old Nahel Merzouk has caused ripples across the French public, resulting in a wave of protests in major cities across the country. The protests are unlikely to have a lasting impact on the macroeconomic environment in the long term but have likely caused substantial tactical demand disruption. We expect bouts of public unrest to ease substantially over the coming days, as both the authorities and key members of the protest movement called for peace. The attack on the home of the mayor of Paris has likely further contributed to the attempts of certain protest segments to distance themselves from the violence.
The political repercussions of the protests, however, may prove much more lasting. Following the yellow vest protests and the protests against the pension reform, these latest events are likely to add to President Emmanuel Macron’s political headaches and further erode his authority. Additionally, the self-imposed limited fiscal space will significantly blunt any attempt to soften public perceptions and re-energize support for the government. Despite plans to cut taxes on middle-income earners, the government has failed to provide a specific outline of the measures, and much of these are set to occur well beyond 2024. Meanwhile, the unrest is likely to be exploited by the opposition, most notably Marine Le Pen and the National Front party. The latter is likely to strengthen its anti-immigration rhetoric in a bid to increase its popularity among voters and add pressure on the government.
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