## Press Release: IMF Executive Board Concludes 2013 Article IV Consultation with France _IMF News, August 5, 2013_ ## Source details **Canonical URL:** [Press Release: IMF Executive Board Concludes 2013 Article IV Consultation with France](https://www.imf.org/en/news/articles/2015/09/14/01/49/pr13295) ## Other formats - [Markdown version](/en/news/articles/2015/09/14/01/49/pr13295/index.md) - [Structured JSON version](/en/news/articles/2015/09/14/01/49/pr13295/index.json) - [Bundle manifest](/en/news/articles/2015/09/14/01/49/pr13295/bundle-manifest.json) ## Bibliographic details - Published: August 5, 2013 --- ### Background - Context: weakening economic conditions in Europe, sizeable fiscal consolidation, and domestic policy uncertainty. - 2012 outcome: the French economy "flat lined" in 2012. - Near-term outlook: - Economy projected to contract by 0.2 percent in 2013 and to grow by 0.8 percent in 2014. - Recovery expected to be gradual in the second half of 2013 as economic indicators improved. - Demand and credit: - Credit conditions remain supportive. - Private demand is unencumbered by balance sheet repair issues and likely to respond to improved confidence. - Structural constraints: - Growth potential hindered by structural rigidities in labor and product markets. - Gradual loss of cost competitiveness and export performance noted. - Sizeable declines in the share of manufacturing production and employment and a narrowing of profit shares in national income. - Structural reform progress: - Recent reduction in labor taxes and correction of the labor market toward greater “flexicurity.” - Reforms given important forward momentum. ### Fiscal policy and public finances - Pace of consolidation: - 2013 structural adjustment equivalent to 1.8 percent of GDP, on top of 2.2 percent of GDP sustained over the previous two years. - IMF staff projects fiscal deficit decline from 4.8 percent of GDP in 2012 to 3.9 percent of GDP in 2013. - Composition of adjustment: - About 90 percent of the adjustment to date realized through revenue measures. - IMF staff had suggested a more balanced distribution of the effort (i.e., more expenditure measures). - Fiscal framework changes: - Authorities to set and monitor fiscal objectives in terms of the structural deficit to increase stability and reduce procyclicality. - The Stability Program of April 2013 targets an easing of the pace of adjustment starting in 2014 and a rebalancing of adjustment efforts toward expenditure measures. ### Financial sector and stability - Improvements: - Financial stability risks have abated considerably. - Banks have completed deleveraging objectives and strengthened capital and liquidity buffers. - Remaining concerns: - Bank profitability remains low. - French financial system still needs to adapt fully to new international regulations on bank liquidity. - Continued reliance on wholesale funding in bank funding structures. - Policy recommendations noted by Directors: - Continued vigilance given low bank profitability and weak growth prospects. - Align tax incentives on financial products with regulatory objectives, including by removing tax disincentives against deposits and phasing out regulated interest rates. - Keep process of convergence toward the Single Supervisory Mechanism and Single Resolution Mechanism on track. - Commendation for banking reform aligning resolution regime to the EU directive, ring-fencing trading activities, and strengthening the macro-prudential framework. ### Executive Board Assessment — findings and policy recommendations - Overall assessment: - Directors encouraged by recent improvements in economic indicators and the expected gradual recovery. - Remaining risks include uncertain euro area prospects. - Structural reform emphasis: - Underscored importance of pursuing structural reforms to support recovery of private demand and strengthen competitiveness. - Welcomed progress on structural reforms, including the reduction in the labor tax wedge and the broad labor market reform of 2013. - Encouraged follow-up on implementation and broader reforms to improve competitiveness and growth prospects. - Specific calls: - Reform pensions to increase labor market participation rather than contribution rates. - Pursue deeper labor market reforms to increase employment of the young and low-skilled. - Open product and services markets to greater competition to realize potential growth and employment gains. - Simplify the regulatory framework and improve labor training mechanisms. - Fiscal policy views: - Many Directors saw merit in allowing a smoother pace of adjustment than envisaged in the Stability Program to support the hesitant recovery. - Many other Directors advised persevering with consolidation plans under the program, noting it already allows automatic stabilizers to operate. - While welcoming structural deficit targeting, several Directors noted that nominal targets should not be neglected. - With tax rates already at a very high level, Directors stressed rebalancing fiscal adjustment toward expenditure containment, including in social security and local spending where there is room for improved efficiency. - Financial system recommendations (summary reiterated): - Continue adapting to prudential requirements, notably bank funding structures. - Align tax incentives on financial products with regulatory objectives; remove tax disincentives against deposits; phase out regulated interest rates. ### Selected Economic and Social Indicators, 2010–18 (selected entries preserved exactly) - Real economy (change in percent): - Real GDP: 2010: 1.7; 2011: 2.0; 2012: 0.0; 2013: -0.2; 2014: 0.8; 2015: 1.5; 2016: 1.8; 2017: 1.9; 2018 (Proj.): (not listed) - Domestic demand: 2010: -0.9; 2011: -0.5; 2012: 1.1; 2013: 1.3; 2014: 1.6; 2015: 1.6; 2016: 1.6; 2017: 1.6; 2018 (Proj.): (not listed) - Nominal GDP (billions of euros): 2010: 1937; 2011: 2001; 2012: 2032; 2013: 2061; 2014: 2114; 2015: 2178; 2016: 2251; 2017: 2336; 2018: 2427 - CPI (year average): 2010: 2.1; 2011: 1.4 - Unemployment rate (in percent): 2010: 9.7; 2011: 9.6; 2012: 10.2; 2013: 11.2; 2014: 11.6; 2015: 11.4; 2016: 10.9; 2017: 10.6; 2018: 10.4 - Gross national savings (percent of GDP): 2010: 17.7; 2011: 18.8; 2012: 17.5; 2013: 18.1; 2014: 18.7; 2015: 19.3; 2016: 20.0; 2017: 20.5 - Gross domestic investment (percent of GDP): 2010: 20.8; 2011: 19.8; 2012: 19.1; 2013: 19.4; 2014: 19.5; 2015: 19.7; 2016: 20.3 - Public finance (percent of GDP): - Central government balance: 2010: -6.3; 2011: -4.4; 2012: -3.9; 2013: -2.8; 2014: -2.4; 2015: -2.0; 2016: -1.5; 2017: -1.1 - General government balance: 2010: -7.1; 2011: -5.3; 2012: -4.8; 2013: -3.5; 2014: -1.9; 2015: -1.0; 2016: -0.8 - Structural balance (percent of potential GDP): 2010: -5.7; 2011: -4.6; 2012: -1.7; 2013: -1.2; 2014: -0.4 - Primary balance: 2010: -2.5; 2011: -1.8; 2012: 0.1; 2013: 0.9; 2014: 1.2 - General government gross debt: 2010: 82.4; 2011: 85.8; 2012: 90.2; 2013: 93.5; 2014: 95.0; 2015: 94.9; 2016: 93.8; 2017: 91.4; 2018: 88.7 - Money and interest rates (in percent): - Money market rate 1/: 2010: 0.5 - Government bond yield 1/: 2010: 3.1; 2011: 3.3; 2012: 2.5 - Note: 1/ For 2013, average for January-May. - Balance of payments (in percent of GDP): - Exports of goods: 2010: 20.2; 2011: 21.2; 2012: 21.5; 2013: 21.1; 2014: 21.0; 2015: 21.4; 2016: 21.6 - Volume growth (in percent): 2010: 9.5; 2011: 5.4; 2012: 2.4; 2013: 4.4; 2014: 4.5; 2015: 4.6; 2016: 0.0? (table entries beyond 2015 not fully enumerated) - Imports of goods: 2010: 23.0; 2011: 25.0; 2012: 24.1; 2013: 24.0; 2014: 23.7; 2015: 23.5; 2016: 23.4 - Trade balance: 2010: -3.8; 2011: -3.1; 2012: -3.0; 2013: -2.6; 2014: -2.3 - Current account: 2010: -1.3; 2011: -2.2; 2012: -0.7; 2013: 0.4 - FDI (net): (not enumerated in table) - Official reserves (US$ billion): 2010: 55.8; 2011: 48.6 - Fund position (as of January 31, 2012): - Holdings of currency (percent of quota): 79.7; 73.1; 70.9 - Holdings of SDRs (percent of allocation): 96.1; 95.5; 94.2 - Quota (SDRs million): 10739 - Exchange rates: - Euro per U.S. dollar, period average: 2010: 0.75; 2011: 0.72; 2012: 0.78 - Nominal effective rate, ULC-styled (2000=100): 2010: 102.4; 2011: 100.1 - Real effective exchange rate, ULC-based (2000=100): 2010: 104.3; 2011: 105.4; 2012: 104.8 - Potential output and output gap: - Potential output: 2010: 1.0 - Output gap: 2010: -2.9; 2011: -2.1; 2012: -1.6 - Social indicators (selected): - Per capita GDP (2006): US$35,471 - Life expectancy at birth (2009): 77.7 (male) and 84.4 (female) - Poverty rate (mid-2000s): 14.1 percent (60 percent line), 7.1 percent (50 percent line) - Income distribution (ratio of income received by top and bottom quintiles, 2004): 4.2 ### Note on the Article IV process - Under Article IV: the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. The staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion, the Managing Director summarizes views of Executive Directors, and this summary is transmitted to the country's authorities. *Press Release No. 13/295 — August 5, 2013 — IMF Communications Department* --- ## Content in this bundle - [Cr13251pdf (PDF)](/-/media/websites/imf/imported/external/pubs/ft/scr/2013/_cr13251pdf.pdf){rel="external" type="application/pdf"} --- ## References - [France and the IMF](http://www.imf.org/external/country/FRA/index.htm) - [Press Releases](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr13295_