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Economic growth is projected to continue to strengthen to about 1½ per cent in 2018, boosted by investment and consumption. Firming domestic demand will be supported by rising confidence, cuts in social contribution and business taxes and continued favourable financing conditions. The labour market will gradually recover. Inflation will remain low, since pressures on production capacity are limited. The current account deficit is expected to increase slightly, as solid domestic demand will boost imports.
A continued reduction in debt service costs and some spending restraint will bring the fiscal deficit down to just below 3% of GDP in 2018, but a long-term strategy is needed to reduce public spending and continue lowering high taxes that weigh on employment and investment. Advancing tax cuts would provide a welcome boost to demand. The tax system is too complex and needs to be simplified. In addition, spending should be shifted from lower-priority and inefficient spending toward infrastructure, education and social expenditure focussed on the poor. Unifying the many pension systems could lower administration costs. Such a strategy, combined with further reforms to strengthen competition in services, would create conditions for French firms to be more productive, lifting real incomes and job opportunities.
Too many workers lack the necessary basic and digital skills to benefit from globalisation. More has to be done to hire excellent teachers and improve teaching practices in disadvantaged schools, create apprenticeships at the secondary level and improve access to high-quality training by simplifying the system, improving information about quality and providing effective guidance.
Economic Survey of France (survey page)