The violence and social disorder have already caused enormous damage, but the ultimate impact on economic growth depends on the duration of the unrest and whether it triggers a collapse in public confidence. For France, this turmoil has come at an all-time low. The French economy was already in a precarious situation: sluggish growth, concerns about a fiscal deficit, and high interest rates—multiple factors have continued to suppress economic activity. Since October 17th, France has been engulfed in large-scale riots, with frequent incidents of violence, vandalism, and looting, the images of which have been widely circulated globally. The movement, initially initiated by protests from high school and university students, has rapidly expanded its demands, with the public calling for increased purchasing power, improved public services, and relief from the cost of living. From physical damage to economic standstill Preliminary estimates indicate that the scale of material damage is substantial. As of October 20th, the French Federation of Chambers of Commerce and Industry assessed that over 2,000 businesses have been directly impacted since October 17th, with preliminary losses reaching hundreds of millions of euros. For reference, the summer riots of 2023 resulted in insurance payouts exceeding 790 million euros; while the entire "Yellow Vest" movement resulted in insurance payouts of 256 million euros. Morningstar estimates that insurance claims for this round of riots could reach as high as 1.2 billion euros, approximately 0.04% of France's nominal GDP. These figures are currently estimates and subject to significant uncertainty. Insurance payouts represent only the tip of the iceberg of economic losses. A 2018 report by the French National Assembly on the "Yellow Vest" movement revealed that the riots caused approximately €2 billion in revenue losses for shopping malls and nearly €850 million for hotels, cafes, and restaurants, but insurance payouts for property damage amounted to only €217 million. This demonstrates that the indirect losses from shop closures, sharp declines in customer traffic, and permanent loss of sales far exceeded insurance payouts. Even if we were to calculate this complete economic loss, it cannot be directly equated to a shrinkage in Gross Domestic Product (GDP). GDP measures new production activity over a period of time; the destruction of buildings, vehicles, shop windows, and inventory is essentially a loss of wealth. Subsequent repairs and reconstruction will generate production activity, which is included in GDP, but this does not mean that the damage itself is beneficial to the economy—these resources are merely used to repair existing assets and do not create new social wealth. Therefore, the core impact of the riots on GDP lies in how much economic activity is permanently lost. During the "Yellow Vest" movement in the fall of 2018, the French National Institute of Statistics and Economic Studies (INSEE) analyzed that road blockades, shop closures, and disruptions to the retail, hotel, catering, and transportation systems dragged down GDP growth by approximately 0.1 percentage points in the fourth quarter of that year. While some goods consumption can be postponed and made up later, service consumption such as catering, accommodation, and transportation is irretrievable once missed. Another relevant case is the December 1995 general strike, which lowered GDP growth by approximately 0.2 percentage points that quarter. The 2023 pension reform protests are a more recent example, demonstrating the possibility of a subsequent economic rebound. Research by the Bank of France indicates that the social unrest in March and April 2023 dragged down first-quarter GDP growth by 0.1 percentage points. The subsequent recovery in production activity, particularly in the refining and energy sectors, contributed another 0.1 percentage points to second-quarter GDP growth. In that event, the initial negative impact was completely offset in the following quarter. A greater risk: A blow to market and public confidence. Short-term disruptions may have a chance to be repaired, but a long-term loss of confidence will be more destructive. Violent scenes can discourage people from going to city centers, cause tourists to postpone travel plans, and prompt businesses to postpone investment decisions. A study by the International Monetary Fund (IMF) covering 836 social unrest incidents in 89 countries from 1990 to 2019 found that after escalating social conflict, the average GDP six quarters later was 0.2% lower than the baseline forecast; for larger-scale unrest, the GDP shortfall could reach 1% six quarters later. Therefore, the economic impact of the events that began on October 17 lies not in the already calculated amount of damage, but in whether the unrest can be quelled. If the unrest is short-lived and confined to a localized area, even if many businesses suffer heavy losses, the overall macroeconomic impact will be limited. However, if conflicts recur, businesses close preventatively, and transportation and logistics continue to be disrupted, public confidence will generally decline, and the lost economic activity will be difficult to recover later. Currently, protesters plan to continue demonstrating on October 24 and October 31; several major labor unions have jointly launched a nationwide strike and march scheduled for November 5. This means that the economic disturbance is likely not a one-off shock but will continue to escalate. The initial market reaction has already demonstrated the negative impact of the confidence channel. The spread between French and German 10-year government bond yields widened from 137 basis points on Friday to 153 basis points on October 20, with the French stock market falling in tandem. Of course, the riots are not the only cause of market volatility; fiscal and political concerns had already been weighing on French assets. However, this turmoil has added new uncertainties, leading the market to believe that any future government will face significant difficulties in implementing necessary reforms and cutting fiscal spending. Further tightening of financial conditions will itself drag down the economy. Rising interest rates will gradually increase financing costs for governments, businesses, and residents, suppressing production and housing investment and causing market participants to adopt a wait-and-see approach. Therefore, the economic shock is no longer just from shop closures and business interruptions; rising capital costs and low confidence are also exerting continuous pressure. Weak growth coupled with political constraints exacerbates the predicament . The already bleak economic outlook has been further worsened by the riots. Institutions previously predicted that France's GDP growth rate would be only 0.3% in 2026 and 0.6% in 2027. If the unrest continues, confidence deteriorates further, or market tensions intensify, actual growth may be even lower. The already challenging fiscal situation is now even more difficult. France's public deficit is projected to reach 5.4% of GDP in 2026. The government aims to reduce the deficit to 5% of GDP by 2027; without new policies, the deficit will likely remain around 6.5%. However, this 5% target is based on very optimistic, highly unlikely, assumptions: GDP growth of 0.5% in 2026 and 1% in 2027. This means that even if the entire budget is finalized, the deficit reduction target may not be achieved—if economic growth falls short of expectations, tax revenue will be lower than the government's projections. The budget itself will face difficult parliamentary negotiations; and the current unrest makes it even harder for the public to accept the government's proposed fiscal austerity measures. The government has little room to quell the protests through increased spending and tax cuts. But without concessions, social order will be difficult to restore. If policies are introduced to ease tensions, further worsening the public finances, this will in turn exacerbate investor concerns and push up French financing rates. In short, France lacks both the fiscal space to spend money to maintain social stability and the political capacity to forcefully implement fiscal adjustments. This has trapped France in a vicious cycle: weak economic growth leads to a deteriorating fiscal situation; fiscal risks drive up interest rates; and tightening financial conditions further suppress economic activity. Meanwhile, social unrest weakens the government's political capacity to push forward necessary fiscal reforms. With low growth, high deficits, and political instability combined, the French economy and capital markets are likely to remain under pressure in the coming months.