PARIS, July 17 — France has a “unique window of opportunity” as growth picks up to tackle its weak public finances and high unemployment while reversing its decline in competitiveness, the International Monetary Fund said today.
The IMF said after its annual country review the new French government’s plans to focus on cutting spending was “appropriate” and also deemed its push to make its employment laws more flexible as “broad and ambitious”.
Meanwhile, President Emmanuel Macron’s plans to gradually cut corporate tax to 25 per cent from 33.3 per cent while setting a flat 30 per cent tax on capital income would make France more competitive while boosting investment, IMF staff wrote in the conclusion of their review, known as an Article IV mission.
“With a strong political mandate and economic conditions improving — growth is on track to reach 1.5 per cent this year and further accelerate next year — there is now a unique window of opportunity for such a bold and comprehensive economic reform package,” the IMF said in a statement.
The IMF had previously expected the economy would grow 1.4 per cent this year and 1.6 per cent next year. The French government is targeting growth this year of 1.6 per cent and 1.7 per cent in 2018.
Macron, a former investment banker who later served as economy minister, was elected as France’s youngest president ever in May running on a largely pro-business platform and promises to reform the economy.
A month later he won a commanding majority in parliamentary elections to help carry out his agenda.
However, an official audit in July found the public finances running billions over budget.
That left the government scrambling to come up with savings necessary to cut the public deficit to 3 per cent of economic output and meet an EU cap for the first time in a decade.
The IMF said that would not only require major, across-the-board spending freezes this year but a further “exceptional effort by historical standards” again next year to hit the government’s deficit target of 2.7 per cent. — Reuters