After uneven growth in 2013, real GDP is projected to rise by around 1½ per cent in 2015, helped by strengthening world trade, improving prospects in the euro area and a slower pace of fiscal consolidation. The unemployment rate is expected to fall marginally and stay just below 10% of the labour force.
The budget deficit reduction in 2013 was smaller than originally planned, and the pace of structural consolidation is likely to be reduced further in 2014-15. While this new structural consolidation path needs to be strictly adhered to in order to reach France’s budget objectives, the automatic stabilisers should be allowed to play freely around it to avoid endangering the recovery. The announced cuts in business taxes and social contributions, which add to the recently introduced corporate tax credit (CICE), should promote employment and investment and boost the competitiveness of French firms, thus supporting activity in both the short and longer term. However, these measures need to be financed by significant spending restraint, including planned reductions in inefficient government spending. Stronger capitalisation of systemically important banks would increase the resilience of the economy to financial shocks.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.