On 27 June 2024, the IMF issued a report following the conclusion of consultations with France under Article IV of the IMF’s articles of agreement.

Despite a slowdown in the economic recovery in 2023, the French economy has remained relatively resilient when confronted with financial tightening and weaker external demand in the euro area. Real GDP grew by 1.1% in 2023, with a boost from net exports, while investment was weaker and consumption remained lower. Fiscal underperformance in 2023, with decreased revenues, reduced fiscal space for investment in the green and digital transformation.

The 2024 budget aimed at fiscal consolidation, making space for new spending in critical areas. However, the 2024 budget target has been revised to 5.1% of GDP. Reforms in the pension and unemployment benefit systems are achieving some results, however, labour productivity remains below the levels before the pandemic.

Growth is estimated to reach 1.3% by 2025 up from 0.9% in 2024. Over the medium term, growth is expected to converge towards its potential rate of 1.3%. There is still high uncertainty in the outlook, owing to policy uncertainty domestically and external downside risks, including escalating geopolitical tensions or a global slowdown affecting important trading partners. Faster reform momentum in France and at the EU level could mitigate these risks.

The IMF directors agree with the government’s focus on rebuilding fiscal buffers and achieving a sustainable modernization of the economy. The government should identify a well specified package of measures to support their fiscal consolidation plans. The fiscal consolidation should focus on rationalizing current spending, while preserving room for growth friendly investment.

The IMF notes the significant progress towards reducing greenhouse gas emissions, but considers that further efforts are required to meet important climate mitigation targets. The ongoing spending efforts should be accompanied by other revenue neutral schemes and by higher carbon pricing. The revenue from carbon pricing could be recycled to minimise the impact on vulnerable groups.

In addition to the important reforms to the pension and unemployment benefit systems, France must continue to advance structural reforms to support employment and raise productivity. Education and training reforms are important to prepare workers for the green and digital transformations. Implementation of plans to reform parental leave, and supporting the provision of childcare facilities, could boost labour force participation by women.