News Column

French Recovery Faces Difficult Take Off, Says IMF

July 3, 2014

PARIS (Alliance News) - The French economy has shown considerable resilience through the crisis, but the recovery faces a difficult take off, the International Monetary Fund said in an annual assessment of the French economy.

The Washington-based IMF predicted France to grow 0.7% in 2014, down from the prior estimate of 1%. For 2015, growth is estimated at 1.4% and 1.7% for 2016.

The unemployment rate should begin to show an appreciable decline only in 2016, while inflation is expected to remain at around 1%.

The lender estimates public debt to peak at 95% of gross domestic product in 2015.

According to IMF, France is likely to miss the government deficit target. The budget deficit is projected to narrow to 4% this year and to 3.4% in 2015.

President Francois Hollande target to bring the shortfall down to 3.8% in 2014 and to EU-agreed ceiling of 3% in 2015.

The lender recommended to boost structural reforms that include opening protected sectors to greater competition and continuing down the path of labor market reforms.

Achieving the deficit objectives while delivering on the tax cut commitments leaves no room to deviate from the announced expenditure reductions, the IMF said.

"The major risks are that the initial plans may be diluted in sequential annual budgets and that cuts in transfers to local governments may be compensated by unsustainable cuts in investment, higher taxes or higher debt," Edward Gardner, an assistant director in the IMF's European Department and head of the mission that conducted the assessment said.

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Source: Alliance News

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