“Restoring external competitiveness remains a critical priority and should be complemented by developing domestic sources of growth,” the fund said in the concluding statement of its annual report on the French economy.
Though France should emerge from recession in the second half of the year, its gross domestic product will probably nonetheless show an overall decline of two-tenths of a percent in 2013 from a year earlier, the fund predicted. The French economy shrank in the final quarter of 2012 and the first quarter of 2013.
The I.M.F. predicted that the French economy would grow in 2014, though barely — at an annual rate of eight-tenths of a percent.
The fund called on President François Hollande’s government to raise “the economy’s capacity to create value and generate productivity gains through increased competition in product and services markets”; to build on its recent success in overhauling rigid labor market rules; and to take steps to reduce the jobless rate and the duration of unemployment when workers lose jobs.
Progress on those fronts, the fund said, will help overcome the economy’s main structural problems, which it defined as “a declining rate of productivity growth, low profit margins and a deteriorating export performance.”
France’s economy is second in size only to Germany’s in the 17-country euro zone, but its jobless rate, at 11 percent, is more than double that of Germany’s, 5.4 percent, and its growth has lagged in comparison.
“Significant rigidities hinder the economy’s capacity to grow and create jobs,” the I.M.F. said. It noted that the competitiveness gap between France and other E.U. nations was growing larger.
After a slow start since taking office a year ago, Mr. Hollande has begun taking steps that could eventually make the French labor market more competitive. While the I.M.F. said it welcomed those measures, it noted that their success would depend in the end on how well they were executed.
Pierre Moscovici, the French finance minister, said he welcomed the I.M.F.’s findings, saying in a statement on Tuesday that the report showed “a convergence of views on the diagnosis and analysis of the risks to economic activity in Europe and France.”
The I.M.F., Mr. Moscovici said, had recognized “the scale of the reforms put in place by the government in favor of growth, employment and competitiveness.”
Stepping into the contentious question of austerity, the I.M.F. called on France to continue consolidating its public finances “over the medium term” but said that the government’s efforts to date had won it sufficient flexibility “to moderate the pace” for now. That was consistent with the judgment Wednesday of the European Commission, which gave France and several other bloc members additional time to meet the bloc’s mandated budget deficit targets.
French banks, the I.M.F. noted, have improved their financial positions and greatly eased concerns about a possible financial collapse, but it said they should continue working to improve their funding structures.
The main risks to the French economy, the I.M.F. said, “lie in the precarious growth prospects in Europe,” as well as the uncertainty about the course of domestic tax policy, “which weighs on spending decisions of households and enterprises.”
Article source: http://www.nytimes.com/2013/06/05/business/global/imf-tells-france-to-continue-to-focus-on-growth.html?partner=rss&emc=rss