Economy

France - Economic forecast summary (November 2016)

 

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GDP growth is projected to edge up to 1.6% by 2018, as tax cuts and faster job growth support stronger private consumption. Business investment should also pick up owing to tax reductions and low interest rates. In turn, the unemployment rate should continue to gradually fall, thanks to lower social security contributions, hiring subsidies and significant upscaling of training available to jobseekers. Inflation will remain low, as slack persists.


A continued reduction in debt servicing costs and some spending restraint is projected to bring the fiscal deficit down to just below 3% of GDP in 2018. Tax and social security cuts have reduced labour costs and improved the investment climate. A recent labour law reform clarifies conditions for dismissals and gives more importance to firm-level agreements on working time.


At 57% of GDP, France has one of the highest public spending ratios in the OECD, and high taxes are needed to finance it. The overall fiscal stance is largely neutral over the projection period. However, further tax and social security contribution cuts should be pulled forward to stimulate the economy and reduce unemployment faster. In the longer term, to lower the high tax burden, the government should continue to reduce spending, focussing more on limiting inefficiencies and non-priority areas. This requires continued efforts to better target social spending, reduce the number of sub-central governments and the overlaps in their competencies.

 

 

 

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Other information

Economic Survey of France (survey page)

 

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