## Transcript of France 2020 Article IV Press Briefing _IMF News, January 19, 2021_ ## Source details **Canonical URL:** [Transcript of France 2020 Article IV Press Briefing](https://www.imf.org/en/news/articles/2021/01/19/tr011921-transcript-of-france-2020-article-iv-press-briefing) ## Other formats - [Markdown version](/en/news/articles/2021/01/19/tr011921-transcript-of-france-2020-article-iv-press-briefing/index.md) - [Structured JSON version](/en/news/articles/2021/01/19/tr011921-transcript-of-france-2020-article-iv-press-briefing/index.json) - [Bundle manifest](/en/news/articles/2021/01/19/tr011921-transcript-of-france-2020-article-iv-press-briefing/bundle-manifest.json) ## Bibliographic details - Published: January 19, 2021 --- ### Economic forecast - IMF estimate: GDP declined by around 9 percent in 2020. - IMF baseline projection: recovery of about 5.5 percent in 2021 followed by a further recovery of 4 percent in 2022. - Risks: "extraordinarily high" — primary risk is virus dynamics (reopening after the second wave, possible third wave, pace of vaccinations, timing of herd immunity). - One downside risk removed since the mission: a no deal Brexit (a deal was reached), reducing some downside risks to the French economy. ### Short-run policy priorities - Tackle the health crisis (priority number one): - Continue treatment, public health and safety measures, and vaccinations. - Latest numbers reported: some 450,000 vaccinations, which is about 0.74 percent of the population. - Authorities’ objective: "1 million vaccination this month." - Continue to support economic activity: - Support provided so far described as "excellent" — large quantity of support to households and firms with relatively high take up and significant cushioning effects. - Support should continue as long as the health crisis continues and be flexible (e.g., additional support attached to the new couvre-feu). - Remain vigilant about financial sector risks: - No major problems seen currently; French banking sector entered crisis relatively healthy. - Profitability has slumped but sector has not gone into deficit. - Continued close monitoring recommended. ### Medium-term priorities - Gradually tighten the focus of emergency measures as recovery begins: - Narrow support to firms and population segments most in need. - Provide support for the recovery process: - "Plan de Relance" seen by IMF Executive Directors as an excellent step. - Positive recognition for green components and emphasis on digitalization. - Encourage attention to poverty, inequality, and disadvantaged groups as the recovery proceeds. - Deal with scarring and aftereffects of the crisis: - Encourage increased equity-like support (not just loans and guarantees) to facilitate firms’ return to investment. - Anticipate some increase in loan defaults as support becomes more focused; banks should be flexible, maintain capital buffers, and facilitate transition to new areas of activity. - Fiscal strategy: "PLAN NOW, ACT LATER" - No need for fiscal consolidation in the short run; continue necessary support. - Begin planning now for a credible medium-term fiscal consolidation plan to start in a couple of years once the crisis eases and recovery is solid. - Consolidation program should run over several years to bring deficit down and put the debt-to-GDP ratio on a sustained, declining path; focus primarily on the expenditure side given a high tax burden. ### Financial sector and corporate sector risks (findings and recommendations) - Observed 2020 bankruptcies in France were below their normal level due to government support, loan guarantees, and temporary suspension of bankruptcy processes. - Expect bankruptcies to rise above normal levels once easing begins — viewed as part of normal creative destruction. - Recommendations: - Maintain or expand support for bankruptcy procedures to facilitate rapid, orderly restructuring. - Encourage banks to be flexible in dealing with corporate debt and insolvency problems. - Monitor risk of an extraordinary wave of insolvencies that could increase unemployment and reduce new firm creation. ### Equity gap and equity-like support - IMF staff estimate of the equity gap: something on the order of 1.3 percent of GDP. - Some of this gap being covered by government measures; room for additional support remains. - Assessment of les Prets Participatifs: - Viewed as a potentially excellent mechanism for equity and quasi-equity support. - Recommended to scale up as needed, ensure procedural agility, and consider subordinated lending mechanisms included in the 2021 budget. ### Fiscal consolidation timing (criteria and scenario) - Three criteria for starting consolidation: 1. Recovery should be underway (growth turns positive). 2. GDP should have achieved its pre-crisis level. 3. Growth should be solid with downside risks abating. - Under staff forecast cited in Q&A: "9 in 2020, plus 5½ in 2021, and plus 4 in 2022" — French GDP would return to pre-crisis level only at the end of 2022 or beginning of 2023. - Implication: - If recovery is quicker, consolidation could start in 2022. - Under current forecast, consolidation might begin in 2023. - Consolidation should be state-contingent, not tied to a specific calendar year. ### Key statistics and figures (verbatim) - "around 9 percent" (GDP decline in 2020) - "about 5.5 percent in 2021" - "4 percent in 2022" - "some 450,000 vaccinations" - "0.74 percent of the population" - "1 million vaccination this month" - equity gap estimate: "1.3 percent of GDP" - forecast phrasing in Q&A: "9 in 2020, plus 5½ in 2021, and plus 4 in 2022" *Transcript of France 2020 Article IV Press Briefing* --- ## References - [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) - [Transcripts](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/2021/01/19/tr011921-transcript-of-france-2020-article-iv-press-briefing_