(Bloomberg) — Texas Governor Greg Abbott has a new ambition for the Lone Star State: surpassing France as one of the world’s largest economies.
Abbott predicted that economic output in Texas would soon exceed that of the struggling European nation thanks to booming investment and President-elect Donald Trump’s plans to slash regulations on oil, gas and other industries.
“Texas is going to surpass France when the new numbers come out, and we will have the seventh-largest economy in the entire world,” Abbott told business leaders in Dallas last week.
The Republican governor’s braggadocio is almost certainly premature, though it may one day prove justified. Output in the Lone Star State amounted to about $2.6 trillion in 2023, meaning it would have to surge about 17% to match France’s more than $3 trillion. With both entities predicted to grow moderately this year, France’s advantage is set to endure despite the euro’s approximately 5% decline against the dollar and recent political upheaval that has dented business confidence.
But the economic outlook is deteriorating in France, where far-right leader Marine Le Pen toppled the previous prime minister over a budget dispute. Moody’s Ratings just cut the country’s credit grade, while private-sector business activity shrank for a fourth month.
Texas, meanwhile, has been gaining ground in recent years as its population soared and more companies moved factories, corporate headquarters and investment dollars to the state. In 2015, the year Abbott became governor, the state’s gross domestic product was less than $1.6 trillion, while France’s was $2.4 trillion.
Looking at gross domestic product across borders means relying on different sources with different methodologies. Currency exchange rates introduce another variable, prompting some economists to use a method called purchasing power parity. However imperfect the measurement, though, the size of big US states often invites comparison with European countries.
California, run by Democratic Governor Gavin Newsom, has the largest economy in the US with a $3.9 trillion GDP. That’s not far behind Japan and Germany.
While Texas has a higher per-capita GDP than France given the state’s smaller population, its economic success is often overstated by its leaders. The Texas economy expanded 2.8% in the second quarter, but Abbott is counting on the new Republican administration to supercharge growth.
Central to his outlook for Texas is Trump’s plan to ease federal regulations. The state has been diversifying away from its dependence on energy for decades, but oil and gas remains a big industry. And in a phone call two days after the presidential election last month, Abbott said he and Trump discussed cuts to Environmental Protection Agency rules on oil and gas.
“He said that he’s going to get rid of the EPA regulations that are tying the hands of the energy sector in the state of Texas,” Abbott said. “He is genuinely, forcefully embracing, supporting, pushing and advancing more drilling.”
Another boon in the governor’s eyes: the state’s new business courts, which are designed to ease the legal burden on companies. Elon Musk’s Tesla Inc. ( TSLA ) and SpaceX recently moved their state of incorporation to Texas from Delaware, after the world’s richest person personally relocated from California.
At the Dallas event, Abbott also touted recent constitutional amendments banning income and wealth taxes in Texas. That elicited a fist-bump from energy billionaire and Trump donor Kelcy Warren, who sat to Abbott’s left on-stage.
Despite the governor’s optimism, there’s a danger the Texas economy will sour in the coming years. The state is the country’s top exporter, and Trump’s threat to implement wide-ranging tariffs risks crimping trade.
Similarly, the incoming president’s plan to deport millions of migrants could derail parts of the construction and agriculture industries. Texas, with a total population of about 30 million, was home to about 1.6 million undocumented immigrants as of 2022, according to Pew Research Center.
But that’s not Abbott’s expectation. Bragging rights can make for good politics and the governor is already planning his victory party.
If Texas edges ahead of France in economic size, he said, “we’ll come back to Dallas, Texas, and have a big French fry cook-off.”