The IMF calls on France to tighten its fiscal policy starting next year

“It is justified to start fiscal consolidation in 2023,” the international organization wrote in a report on Monday.

It’s time to stop the + whatever it takes +“: After spending billions to lift businesses and households out of the energy crisis, France needs to start repairing its finances next year, the International Monetary Fund (IMF) recommended on Monday. “We supported it no matter what, but it’s about timeto put an end to it, Jeffrey Franks, IMF mission chief for France, told a news conference.

Through the freezing of electricity and gas prices, energy vouchers, discounts on fuel prices, support for businesses… France has multiplied its expenditure over the last year, estimated by the IMF at more than 2% of its GDP. Government initiatives have made it possible to contain the inflation rate”two or three pointsBelow the level it would have reached without aid measures, Jeffrey Franks welcomed. “France has the lowest level of inflation in Europe thanks to the tariff shield“, echoed Economy Minister Bruno Le Maire in a reaction sent to AFP.

But these exceptional expenditures also weighed on public finances already badly degraded by the Covid-19 pandemic during which the government notably financed partial unemployment and business closures at any cost. After these two crises and when the aid linked to the pandemic disappeared “it is justified to start fiscal consolidation in 2023“, writes the IMF in the conclusions of an economic assessment mission of France, known as “article IV“.

But this is not the road that Paris is taking, notes the Washington institution, noting that “the 2023 budget law does not aim at reducing the deficit, postponing the fiscal adjustment to 2024“. The government counts on a public deficit of 5% next year after 4.9% this year, and plans to return below 3% in 2027, where its big neighbors are betting on a higher return rapid at this level.In its document released on Monday, the IMF still expects growth of 0.7% next year in France.confirmed» for Bruno Le Maire «the resilience of the French economy“.

This is great news“added the Minister of Public Accounts Gabriel Attal. “I had heard many doubts about the predictions that could have been made“he said during a public session in the Senate. The Banque de France is therefore counting on growth between -0.5% and 0.8% in 2023. For Gabriel Attal, the IMF is maintaining its growth forecast”because he knows we have the determination to keep acting for our economy“.

Aid targeting

However, the IMF also fearsa slight widening of the deficitin 2023, citing the extension of energy measures and the continuation of the elimination of production taxes for companies. Targeting energy aid could “largelyallow for a fiscal tightening of a quarter of a point of GDP, calculates the IMF, also suggesting a possible postponement of tax cuts on production.

Other avenues to reduce government spending and ultimately the deficit, according to Mr. Franks: pension and unemployment insurance reforms, as well as narrowing tax loopholes. “We will implement“Bruno Le Maire hammered out the first two reforms on Monday, while Labor Minister Olivier Dussopt has just presented the new rules for calculating unemployment benefits to the social partners.

Jeffrey Franks also insists on “clarify who does whatbetween the government and local authorities, in order to avoidduplication of expenditure between central administration and local administrations“. In the long run, the French deficit should remain above the level at which it stabilizes the debt, the IMF worries. The Washington institution therefore calls “a sustained adaptationreduce the deficit to 0.4% of GDP by 2030 based on the reduction in the growth of current expenditure, in particular that linked to the pandemic and the energy crisis.

SEE ALSO – French growth is “fragileaccording to the IMF

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