France - Economic forecast summary (June 2016)


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Economic growth is projected to reach 1.4% this year and 1.5% in 2017 thanks to lower energy prices, tax cuts on labour and businesses and persistently low interest rates. Employment will increase, supported by lower social security contributions and new hiring subsidies, but will lead to only a gradual fall in unemployment. Inflation will remain low, as slack will persist to the end of the forecast period.

Despite tax reductions, lower debt-servicing costs and some spending restraint should bring the fiscal deficit down to 3% of GDP in 2017. This will limit further increases in public debt, while minimising risks to the still fragile recovery. To fight high unemployment the authorities announced new hiring subsidies for small and medium-sized firms and up-scaled training measures for jobseekers. A draft labour market reform clarifies conditions for dismissals for economic reasons and gives more room for firm-level negotiations, mainly as to working time.

The level of productivity is high, but productivity growth has been weak for several decades. Quickly implementing the foreseen quality assurance and guidance systems for training would help foster the inclusion of low-skilled workers in the workplace by strengthening their productivity. Greater legal certainty for dismissals would make firms more willing to hire and take chances on expansion, offering more stable jobs. Easing entry into a wider range of regulated professions would enhance competition and productivity, thereby lowering prices to the benefit of consumers, especially poor ones.

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