France's widening trade deficit exposes the country's structural weaknesses and uncompetitive domestic production, S&P Global Ratings economists said in a report June 12.

The country's trade balance has been in deficit since 2002 and widened to €49 billion in 2016 from €45 billion in 2015. An improvement in the balance of goods between 2012 and 2015 was primarily due to a weaker euro and lower oil prices rather than any structural improvement, the S&P economists said, noting that France's export market share has declined more than the rest of the eurozone on average, as French firms find it more difficult to respond to an acceleration in global external demand.

"French exporters have increasingly been competing on price, therefore squeezing their margins, creating a vicious circle where lower profits hamper investments and in turn innovation," said S&P Global Ratings economist Sophie Tahiri.

A rise in research and development and innovation spending could reduce the difficulties that French small and midsize enterprises face in achieving critical size for export, Tahiri said.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.