French economic growth: OECD revises assessment

This Thursday, the OECD slightly increased its growth forecast for France for 2024, bringing it to 0.7% from the 0.6% announced in February, while warning that “new fiscal consolidation measures will be required.”

According to the organization’s economic forecasts, government consumption and investment are expected to slow in 2024 as a result of fiscal austerity measures. In addition, at the beginning of the year, “employment lost momentum as economic activity slowed and the unemployment rate increased slightly, reaching 7.4% in February 2024,” the OECD said.

However, private consumption should strengthen under the impact of falling inflation, the quarterly report said. “Overall stability in commodity prices will allow inflation to continue to decline,” he continues. Consequently, after GDP growth of 0.9% in 2023 and then 0.7% this year, it is expected to recover to 1.3% in 2025 (up from 1.2% announced in February). Progress is almost the same as in Italy (where GDP growth is expected to be 0.7% in 2024 and 1.2% in 2025), but higher than in Germany (where growth is estimated at 0.2% in 2024 , rather than 1.1% in 2025).

The need for a new budget plan

However, the OECD warns of several risks, including renewed geopolitical tensions. It also highlights the weight of public debt, which will amount to almost 111% of GDP by the end of 2023.

In these circumstances, and despite the fact that ratings agencies Fitch and Moody’s left France’s sovereign ratings unchanged at the end of April, “a medium-term fiscal plan is needed to determine the trajectory of fiscal consolidation,” the organization said. At the beginning of the year, the executive branch canceled by decree ten billion euros in loans in areas ranging from the environment to development aid, including higher education. Bercy then announced an effort to save an additional 10 billion this year.

The announcement “is welcome, but additional efforts at fiscal consolidation will be needed to decisively reduce the debt, in particular by reining in the general government wage bill and streamlining social, health and tax expenditures,” the OECD report argues.