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France's economic policy/IMF annual report

France’s economic policy/IMF annual report

Published on July 29, 2011
Communiqué issued by the Ministry for the Economy, Finance and Industry

Paris, July 27, 2011

On Monday, 25 July the Executive Board of the International Monetary Fund (IMF) reached its conclusions for the annual report on France under Article IV of its Articles of Agreement.

The IMF believes France’s economic prospects are positive and predicts GDP growth of 2% in 2011 – in line with the government’s forecast – while emphasizing the uncertainties represented by the Euro Area sovereign debt crisis and by energy and commodity prices.

The IMF is pleased that France’s strategy to improve public finances is appropriate and credible and strikes the right balance between budgetary sustainability and support for growth. The IMF emphasizes the contribution of the 2010 pensions reform to the sustainability of public finances. It calls on France to ensure public spending is kept under control, particularly in local government and social security. It also recommends that additional savings be prepared in order to comply with commitments to reduce deficits in the event of slower growth. Finally, the IMF underlines the importance of a constitutional rule such as that proposed by the government, to strengthen the credibility of budgetary adjustments in the medium term.

The IMF pays tribute to the solidity of the French banking sector, confirmed by the latest stress tests, and believes the creation of the Autorité de contrôle prudentiel (1) and the reforms implemented in this area at European level have reinforced France’s prudential framework. The IMF calls for vigilance on price levels for properties, which it regards as overvalued and which could justify the introduction of macro-prudential measures, even through the risks for financial stability today appear limited. While stressing the benefits to be expected by 2013-2014 from compliance with the Basel III requirements, the IMF welcomes France’s full involvement in the international discussions under way on the reform of financial regulation.

The IMF stresses the importance of continuing structural reforms in France to strengthen competitiveness, creating jobs and increasing productivity. In particular, it recommends keeping salary increases in line with productivity increases, boosting participation in the labour market and continuing to enhance competition in the service sector. It especially welcomes the progress contained in the economy modernization law with regard to telecommunications, and in the new organization of the electricity market./.

(1) Financial sector watchdog

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