The IMF calls on France to tighten its fiscal policy as of next year

Through the freezing of electricity and gas prices, energy vouchers, discounts on fuel prices, support for businesses... France has increased spending for a year, evaluated by the IMF at more than 2% of its GDP.

These weighed on public finances already very degraded by the Covid-19 pandemic during which the government notably financed partial unemployment and the closures of businesses under “whatever the cost”.

After these two crises and at a time when aid linked to the pandemic has faded, "it is justified to start budgetary consolidation in 2023", writes the IMF in the conclusions of an economic assessment mission of France, known as "Article IV".

However, this is not the path that Paris is taking, notes the Washington institution, noting that "the 2023 finance law does not target a reduction in the deficit, postponing the budgetary adjustment to 2024".

The government is counting on a public deficit of 5% next year after 4.9% this year, and plans to return below the 3% mark in 2027, where its big neighbors are betting on a faster return to this level.

In its document published on Monday, the IMF, which still expects growth of 0.7% next year in France, fears "a slight widening of the deficit" in 2023, citing the extension of energy measures and the continuation of the suppression production taxes for companies.

However, targeting energy aid could "largely" allow a budgetary tightening of a quarter of a point of GDP, calculates the IMF, also citing a possible postponement of production tax cuts.

In the longer term, the French deficit should remain above the level at which it stabilizes the debt, also anticipates the IMF, which fears a widening of the “already significant” gap with comparable European countries.

It calls for "a sustained adjustment" to reduce the deficit to 0.4% of GDP by 2030 based on the reduction in the growth of current expenditure, in particular those linked to the pandemic and the energy crisis.

The IMF is also emphasizing structural reforms, by raising the retirement age, completing the unemployment insurance reform, rationalizing certain expenditures (fossil fuels or housing), and that of the civil service workforce.

© 2022 AFP