{
  "title": "IMF Executive Board Concludes 2020 Article IV Consultation with France",
  "publication": "IMF News, January 19, 2021",
  "sourceUrl": "https://www.imf.org/en/news/articles/2021/01/19/pr2014-france-imf-executive-board-concludes-2020-article-iv-consultation",
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  "summary": "On January 13, 2021, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with France.",
  "publishDate": "2021-01-19",
  "sections": [
    {
      "heading": "Overview and context",
      "content": "- On January 13, 2021, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with France.\n- France entered 2020 with a largely closed output gap and falling unemployment but faced long-standing challenges: high public and private debt, sluggish productivity growth, and inequality of opportunities.\n- The Covid-19 pandemic triggered a severe health and economic crisis; France was among the most-affected countries globally.\n- To contain the virus, the government implemented containment measures including national lockdowns in Spring and Fall 2020.\n- GDP contracted by about 19 percent (y-on-y) in the first half of 2020; overall growth is expected to have contracted by around 9 percent for the year.\n- Inflation trended down due to the fall in oil prices and decelerating core inflation.\n- The financial sector experienced a short period of turbulence in Q1 2020 but has weathered the crisis well, supported by prudential and monetary measures."
    },
    {
      "heading": "Policy response and recovery plan",
      "content": "- Fiscal and financial measures implemented:\n  - Expansion of the short-time work scheme.\n  - Grants for small firms and self-employed.\n  - Public guarantees for bank loans to firms.\n- Recovery measures focus on:\n  - Green and digital transformation of the economy.\n  - Employment support.\n  - Boosting firms’ competitiveness.\n- Growth in 2021 is forecast at 5½ percent; medium-term output will remain below the pre-crisis trend due to impaired balance sheets and higher unemployment.\n- Risks to the forecast are large and dominated by virus dynamics."
    },
    {
      "heading": "Executive Board Assessment — key findings",
      "content": "- Directors agreed with the thrust of the staff appraisal and commended the swift and flexible policy response that supported households and firms and limited the economic burden.\n- Directors noted the growth outlook is highly uncertain, with risks tilted somewhat to the downside predominantly from virus-related dynamics.\n- Directors commended the recovery plan (Plan de Relance), particularly its job-rich green investment policies.\n- Fiscal policy guidance:\n  - Maintain appropriate policy support in the near-term, guided by health conditions.\n  - As recovery gains traction, make support more targeted to those most affected to facilitate economic restructuring and contain fiscal costs.\n  - Develop a credible consolidation plan now to be implemented only once the recovery is solidly underway to put debt on a firm downward path over the medium term.\n- Corporate sector and financial stability:\n  - Address risks from corporate insolvency; note the spike in corporate debt driven by state-guaranteed loans and the sizeable corporate equity gap.\n  - Welcome new equity support initiatives and encourage augmenting or adapting them as needed.\n  - Recommend enhancing debt restructuring mechanisms as a complementary measure.\n  - Banking sector entered the crisis with comfortable buffers and facilitated credit provision, but bank capital should be closely monitored given potential future corporate defaults and already limited bank profitability.\n  - Regulatory flexibility (release of counter-cyclical capital buffer, measures to help banks extend loan moratoria) is welcome but should be temporary and time bound.\n  - Broadly maintain macroprudential measures for household and corporate sectors to mitigate buildup of risks.\n- Labor market and inclusion:\n  - Crisis disproportionately affected lower-skilled workers and the young.\n  - Call for policies that boost employment for vulnerable groups and facilitate new work relationships in dynamic sectors.\n  - Encourage continued reform agenda to reduce structural unemployment and increase labor force participation, particularly of youths, over the medium term.\n- Climate and green policy:\n  - As recovery strengthens, continue implementing green policies consistent with Paris Climate Agreement commitments and European initiatives, including strengthening carbon pricing."
    },
    {
      "heading": "Selected economic indicators and projections (2018-21)",
      "content": "- Real economy (change in percent)\n  - Real GDP: 1.8 (2018); 1.5 (2019); -9.0 (2020); 5.5 (2021)\n  - Domestic demand: 1.4 (2018); 1.7 (2019); -7.4 (2020)\n  - Foreign balance (contr. to GDP growth): 0.4 (2018); -0.2 (2019); -1.6 (2020); -0.1 (2021)\n  - CPI (year average): 2.1 (2018); 1.3 (2019); 0.5 (2020); 0.7 (2021)\n  - GDP deflator: 1.0 (2018); 1.2 (2019); 2.3 (2020); 0.3 (2021)\n- Public finance (percent of GDP)\n  - General government balance: -2.3 (2018); -3.0 (2019); -10.6 (2020); -7.7 (2021)\n  - Revenue: 53.4 (2018); 52.6 (2019); 52.7 (2020)\n  - Expenditure: 55.7 (2018); 55.6 (2019); 63.2 (2020); 60.3 (2021)\n  - Primary balance: -0.7 (2018); -9.3 (2019); -6.5 (2020)\n  - Structural balance (percent of pot. GDP): -1.7 (2018); -2.0 (2019); -3.8 (2020); -4.7 (2021)\n  - General government gross debt: 98.1 (2018); 115.3 (2019); 117.6 (2020)\n- Labor market (percent change)\n  - Employment: 0.6 (2018); -1.3 (2019); -1.0 (2020)\n  - Labor force: 0.2 (2018); 0.0 (2019); 0.9 (2020)\n  - Unemployment rate (percent): 9.0 (2018); 8.5 (2019); 8.7 (2020); 10.4 (2021)\n- Credit and interest rates (percent)\n  - Growth of credit to the private non-financial sector: 5.3 (2018); 8.0 (2019); 3.4 (2020)\n  - Money market rate (Euro area): -0.4 (2018); ...\n  - Government bond yield, 10-year: 0.8 (2018); 0.1 (2019)\n- Balance of payments (percent of GDP)\n  - Current account: -0.6 (2018); -2.1 (2019)\n  - Trade balance of goods and services: -1.8 (2018)\n  - Exports of goods and services: 33.0 (2018); 32.8 (2019); 28.0 (2020); 27.2 (2021)\n  - Imports of goods and services: -34.0 (2018); -33.9 (2019); -29.8 (2020); -28.9 (2021)\n  - FDI (net): 2.4 (2018)\n  - Official reserves (US$ billion): 66.1 (2018); 69.7 (2019)\n- Exchange rates\n  - Euro per U.S. dollar, period average: 0.85 (2018); 0.89 (2019)\n  - NEER, ULC-styled (2005=100, +=appreciation): 98.2 (2018); 97.1 (2019)\n  - REER, ULC-based (2005=100, +=appreciation): 92.6 (2018); 90.4 (2019)\n- Potential output and output gap\n  - Potential output (change in percent): -4.3 (2018); 4.0 (2019)\n  - Memo: per working age person: 1.1 (2018); -4.2 (2019); 4.1 (2020)\n  - Output gap: -0.5 (2018); -4.9 (2019); -3.6 (2020)\n\nIMF Press Release No. 21/14 — IMF Executive Board Concludes 2020 Article IV Consultation with France (January 19, 2021).\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- IMF COVID-19 Hub\n- Policy Tracker\n- Financial Assistance\n- Questions & Answers\n- France and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2021/01/19/pr2014-france-imf-executive-board-concludes-2020-article-iv-consultation"
    }
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    "Published: January 19, 2021",
    "On January 13, 2021, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with France.",
    "France entered 2020 with a largely closed output gap and falling unemployment but faced long-standing challenges: high public and private debt, sluggish productivity growth, and inequality of opportunities.",
    "The Covid-19 pandemic triggered a severe health and economic crisis; France was among the most-affected countries globally.",
    "To contain the virus, the government implemented containment measures including national lockdowns in Spring and Fall 2020.",
    "GDP contracted by about 19 percent (y-on-y) in the first half of 2020; overall growth is expected to have contracted by around 9 percent for the year.",
    "Inflation trended down due to the fall in oil prices and decelerating core inflation.",
    "The financial sector experienced a short period of turbulence in Q1 2020 but has weathered the crisis well, supported by prudential and monetary measures.",
    "Fiscal and financial measures implemented:",
    "Recovery measures focus on:",
    "Growth in 2021 is forecast at 5½ percent; medium-term output will remain below the pre-crisis trend due to impaired balance sheets and higher unemployment.",
    "Risks to the forecast are large and dominated by virus dynamics.",
    "Directors agreed with the thrust of the staff appraisal and commended the swift and flexible policy response that supported households and firms and limited the economic burden.",
    "Directors noted the growth outlook is highly uncertain, with risks tilted somewhat to the downside predominantly from virus-related dynamics.",
    "Directors commended the recovery plan (Plan de Relance), particularly its job-rich green investment policies.",
    "Fiscal policy guidance:",
    "Corporate sector and financial stability:",
    "Labor market and inclusion:",
    "Climate and green policy:",
    "Real economy (change in percent)",
    "Public finance (percent of GDP)",
    "Labor market (percent change)",
    "Credit and interest rates (percent)",
    "Balance of payments (percent of GDP)",
    "Exchange rates",
    "Potential output and output gap",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[IMF COVID-19 Hub](https://www.imf.org/en/Topics/imf-and-covid19)",
    "[Policy Tracker](https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19)",
    "[Financial Assistance](https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker)",
    "[Questions & Answers](https://www.imf.org/en/About/FAQ/imf-response-to-covid-19)",
    "[France and the IMF](http://www.imf.org/external/country/FRA/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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