{ "title": "France: Staff Concluding Statement of the 2025 Article IV Mission", "publication": "IMF News, May 22, 2025", "sourceUrl": "https://www.imf.org/en/news/articles/2025/05/22/cs-france-2025", "canonical": "https://www.imf.org/en/news/articles/2025/05/22/cs-france-2025", "overlayPath": "/en/news/articles/2025/05/22/cs-france-2025/index.md", "summary": "France: Staff Concluding Statement of the 2025 Article IV Mission", "publishDate": "2025-05-22", "sections": [ { "heading": "Mission summary", "content": "- IMF mission conducted discussions during May 12-22 for the 2025 Article IV Consultation with France; mission led by Manuela Goretti and comprising Florian Misch, Rasmane Ouedraogo, Maryam Vaziri, and Torsten Wezel.\n- Key assessment: French economy has demonstrated resilience despite high uncertainty, with disinflation progressing and the labor market remaining robust.\n- Main challenges: high and rising public debt, significant domestic and external headwinds to the recovery, and the need to strengthen public finances and pursue structural reforms.\n- Authorities’ commitment: bring the deficit below 3 percent of GDP by 2029; mission welcomes this commitment and calls for a credible and well-designed package of measures.\n- Financial sector: remains resilient, but supervisory practices must continue adapting to an increasingly complex financial landscape.\n- EU dimension: sustained efforts to deepen the European single market are critical to support the economy and strengthen shock absorption." }, { "heading": "Economic outlook", "content": "- Short-term growth projections:\n - Real GDP growth projected to slow to 0.6 percent in 2025.\n - Real GDP growth projected to reach 1 percent in 2026.\n- Medium- and long-term projections:\n - Over the medium term, growth projected to converge to around 1.2 percent.\n - Growth projected to decelerate towards its long-term potential of 1 percent.\n- Inflation projections:\n - Average headline inflation projected at 1.2 percent in 2025.\n - Core inflation projected at 1.9 percent in 2025.\n- Drivers and risks:\n - Projections reflect delayed recovery in private consumption and investment due to weak confidence and fiscal tightening, despite some uplift from monetary policy easing.\n - Weaker external demand amid trade tensions, market volatility, and geo-economic uncertainty expected to dampen exports and investment.\n - Projections based on April World Economic Outlook global assumptions and do not reflect the latest trade policy announcements.\n- Downside risk factors:\n - Deepening geoeconomic fragmentation and rising trade tensions could disrupt trade and financial flows, tighten financial conditions, reduce domestic demand, and worsen debt dynamics.\n - Political fragmentation and social tensions could delay fiscal consolidation and reform efforts, raising fiscal risks.\n- Upside scenarios:\n - Easing trade tensions and renewed structural reform momentum could improve medium-term growth.\n - Stronger consumption if household saving rates ease more rapidly.\n - Higher demand in France and Europe—including for defense and for digital and green technologies—could boost investment and exports.\n - Deeper EU coordination and integration could strengthen reform outcomes." }, { "heading": "Fiscal policy: reducing debt while refocusing spending priorities", "content": "- Current fiscal assessment:\n - Under staff’s policy baseline (legislated and clearly specified measures only), deficit projected to decline to 5.4 percent of GDP in 2025, in line with the budget target.\n - Pending approval of significant additional measures, the deficit would remain around 6 percent of GDP in the medium term, keeping debt on an upward trend until 2030.\n - Debt dynamics have weakened significantly after fiscal slippages in 2023 and 2024; debt remains highly sensitive to the real interest rate and growth path.\n- Policy recommendation and targets:\n - Staff recommends a frontloaded structural fiscal effort of 1.1 percent of GDP in 2026.\n - Followed by an average of about 0.9 percent of GDP per year over the medium term.\n - The recommended adjustment would allow exit from the excessive deficit procedure by end-2029, as targeted.\n - Staff’s debt sustainability analysis indicates the debt-stabilizing primary balance would be reached in 2027 under the recommended path.\n- Principles for fiscal consolidation:\n - Given France’s already high tax-to-GDP ratio, new tax measures should focus on reducing inefficient tax expenditures and tackling tax avoidance while improving equity.\n - Exceptional temporary revenue measures can help kickstart adjustment, but sustained tax-based consolidation of the needed magnitude would hamper business confidence, household consumption, and growth potential.\n - Continue monitoring and evaluation of tax expenditure programs to address inefficiencies and generate savings; simplify the tax system to facilitate revenue forecasting.\n - Rationalize spending and strengthen efficiency across central government, social security, and local governments—France has the highest spending-to-GDP ratio among EU countries.\n - Preserve growth-enhancing investment in key priority areas and mitigate distributional impacts on the most vulnerable.\n - Expand spending reviews and minimize overlaps across government entities, including local governments, to streamline spending and reduce red tape.\n - Improve targeting of social benefits (including reviewing eligibility and duration of unemployment benefits) to better target active labor market initiatives.\n - Further simplify and harmonize pension schemes while ensuring a balanced system; build on the 2023 pension reform to foster less fragmented and longer careers and enhance sustainability and intergenerational equity of the social security system.\n - Enhance monitoring and financial coordination to generate savings at local and national levels.\n- Public finance management improvements:\n - Authorities’ initiatives to reinforce public finances forecasting and budget controls are welcome.\n - March 2025 Action plan aims at enhancing monitoring of tax revenue, fostering greater transparency, and reinforcing the role of the High Council for Public Finances.\n - Sustained efforts needed to identify and proactively address fiscal risks and enhance fiscal policy credibility.\n - Contingency plans are necessary to ensure pressing priority spending needs, including in defense, are met without compromising public finances." }, { "heading": "Macrostructural policies to support jobs and productivity growth", "content": "- Challenge and importance:\n - Raising weak productivity growth is critical given substantial fiscal consolidation needs.\n - The per capita income gap between France and the US has increased since the early 2000s and now exceeds 20 percent, primarily due to lower productivity and employment in France.\n - An increase in potential GDP growth of 0.3 percentage points could help reduce public debt by nearly 10 percent of GDP over the long term.\n- Policies to harness digital and green transitions:\n - France is well-positioned in low-carbon technologies and has potential to become a European hub for Artificial Intelligence.\n - Authorities reviewing and rationalizing state aid and R&D tax expenditures to focus on most impactful schemes and better target eligibility criteria.\n - Enhance access to finance and reduce financing costs for productive but credit-constrained firms.\n - Advance the EU Savings and Investment Union to increase availability of capital and its efficient allocation.\n- Market structure and regulatory reform:\n - Ease entry barriers and reduce regulatory burden, particularly administrative market entry barriers in some services sectors.\n - The Simplification Bill, currently under discussion, would reduce regulatory burden and streamline requirements, especially for small and medium size firms.\n - At the EU level, deepen the single market by removing remaining intra-EU trade barriers and harmonizing regulations to help firms achieve economies of scale and incentivize innovation.\n- Labor market and inclusion:\n - Sustain efforts to promote employment and job quality amid an aging workforce.\n - Employment rates have increased but remain low in segments of the population compared to other countries.\n - Policy areas: further social benefit reforms to enhance work incentives and reduce career fragmentation (especially for younger and older individuals); raise labor force participation of women (including recent initiatives to support STEM careers); better integrate migrants into the labor market.\n - Promote workforce skills and healthy aging to contribute to job quality." }, { "heading": "Adapting to a complex financial landscape", "content": "- Banking sector resilience:\n - Banking sector demonstrated resilience to recent shocks, supported by prudent lending standards and strong precautionary buffers.\n - Profitability remains below the EU average, but banks’ solvency and liquidity positions are robust, with adequate buffers.\n - Sound prudential measures mitigate housing market risks as property prices stabilize.\n - Risks from corporate indebtedness and sovereign exposures remain manageable.\n - French banks show resilience under severe geopolitical and recessionary stress test scenarios applied in the IMF’s 2025 Financial Sector Assessment Program (FSAP).\n- Macroprudential and supervisory recommendations:\n - Continue adapting strong financial oversight and macroprudential toolkit to evolving risks.\n - Maintain and update conservative borrower-based limits to reflect evolving risks.\n - Continue improving guidance regarding the level of the existing countercyclical buffer and proactively adjust rates as warranted.\n - Financial institutions should proactively integrate cyber and climate risks into governance and risk management.\n- Non-bank financial interconnections and liquidity:\n - Connections between banking system, insurance firms, and domestic funding markets warrant continued close monitoring.\n - FSAP stress test indicates investment funds possess sufficient liquidity to withstand large redemption shocks; banks’ liquidity buffers can absorb potential market shocks from associated fixed-income sell-offs.\n - Liquidity management tools to contain redemption risks have been widely adopted.\n - Scope exists to further strengthen oversight through greater monitoring and data sharing on fund liability structures and closer collaboration among non-bank financial institutions supervisors in France and at the EU level.\n\nSource: IMF staff concluding statement of the 2025 Article IV mission to France, May 22, 2025.\n\n---\n\n\n References\n\n- France and the IMF\n- IMF Policy Advice -- A Factsheet\n- Mission Concluding Statements\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2025/05/22/cs-france-2025" } ], "bullets": [ "[Markdown version](/en/news/articles/2025/05/22/cs-france-2025/index.md)", "[Structured JSON version](/en/news/articles/2025/05/22/cs-france-2025/index.json)", "[Bundle manifest](/en/news/articles/2025/05/22/cs-france-2025/bundle-manifest.json)", "Published: May 22, 2025", "IMF mission conducted discussions during May 12-22 for the 2025 Article IV Consultation with France; mission led by Manuela Goretti and comprising Florian Misch, Rasmane Ouedraogo, Maryam Vaziri, and Torsten Wezel.", "Key assessment: French economy has demonstrated resilience despite high uncertainty, with disinflation progressing and the labor market remaining robust.", "Main challenges: high and rising public debt, significant domestic and external headwinds to the recovery, and the need to strengthen public finances and pursue structural reforms.", "Authorities’ commitment: bring the deficit below 3 percent of GDP by 2029; mission welcomes this commitment and calls for a credible and well-designed package of measures.", "Financial sector: remains resilient, but supervisory practices must continue adapting to an increasingly complex financial landscape.", "EU dimension: sustained efforts to deepen the European single market are critical to support the economy and strengthen shock absorption.", "Short-term growth projections:", "Medium- and long-term projections:", "Inflation projections:", "Drivers and risks:", "Downside risk factors:", "Upside scenarios:", "Current fiscal assessment:", "Policy recommendation and targets:", "Principles for fiscal consolidation:", "Public finance management improvements:", "Challenge and importance:", "Policies to harness digital and green transitions:", "Market structure and regulatory reform:", "Labor market and inclusion:", "Banking sector resilience:", "Macroprudential and supervisory recommendations:", "Non-bank financial interconnections and liquidity:", "[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)", "[Mission Concluding Statements](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)" ], "alternates": { "markdown": "/en/news/articles/2025/05/22/cs-france-2025/index.md", "json": "/en/news/articles/2025/05/22/cs-france-2025/index.json", "bundleManifest": "/en/news/articles/2025/05/22/cs-france-2025/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T03:53:09.392Z" }