In the report, the IMF, while predicting that French growth is forecast to pick up to a potential pace of 1.3% this year, from 1.1% in 2023, said the outlook is still subject to high uncertainties.
Political fragmentation and uncertainty at home, especially following election results that put the New Popular Front in power and without a government to form, could delay fiscal consolidation and reforms, straining confidence and public finances.
External downside risks remain, including rising geopolitical tensions and a sharp global slowdown in key trading partners, which could also weigh heavily on the outlook.
On the contrary, as the IMF notes, a faster pace of reforms in France and at the EU level could mitigate these risks. The French economy is said to have remained resilient in the face of recent shocks and achieved a gradual recovery, but the response to the crisis and slower-than-expected growth have weighed on public finances, reducing fiscal space at a time of growth. Investment needs for green and digital transition.
In this context, it is proposed to shift the focus towards the restructuring of fiscal reserves and achieving a sustainable modernization of the economy with a well-defined and credible plan of measures underlying fiscal consolidation programs.
The IMF highlights the need for significant additional efforts to reduce the deficit below 3% of GDP by 2027 and put debt on a sustainable downward trajectory.
He adds that the adjustment will help strengthen France’s resilience to shocks, noting how the future evolution of public finances is subject to a rise in sovereign spreads or a fall in growth.
The Fund therefore suggests that fiscal consolidation should focus on rationalizing current spending while maintaining room for growth-enhancing investments.