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

“It is justified to start fiscal consolidation in 2023,” wrote the international organization, in a report on Monday.

It’s time to stop the + whatever it takes +“: after spending billions to relieve businesses and households from the energy crisis, France must begin next year to clean up its finances, the International Monetary Fund (IMF) recommended on Monday. “We backed it no matter what, but it’s timeto put an end to it, said Jeffrey Franks, IMF mission chief for France, at a press conference.

Through the freezing of electricity and gas prices, energy vouchers, discounts on fuel prices, support for businesses… France has multiplied spending over the past year, evaluated by the IMF at more than 2% of its GDP. The government’s initiatives have made it possible to contain the rate of inflation “two to three dotsBelow the level it would have reached without aid measures, welcomed Jeffrey Franks. “France has the lowest level of inflation in Europe thanks to the tariff shield“, echoed the Minister of the Economy Bruno Le Maire in a reaction sent to AFP.

But these exceptional expenses have also 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 when the aid linked to the pandemic faded, “it is justified to start fiscal consolidation in 2023“, writes the IMF in the conclusions of an economic assessment mission of France, known under the name of “article IV“.

But this is not the path that Paris is taking, notes the Washington institution, noting that “the 2023 budget law does not target deficit reduction, postponing the fiscal 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 Monday, the IMF still expects growth of 0.7% next year in France. An estimate thatconfirmed» for Bruno Le Maire «the resilience of the French economy“.

That’s very good news“added the Minister of Public Accounts Gabriel Attal. “I had heard many doubts about the predictions that could have been made“, he said during a public session in the Senate. The Banque de France is thus counting on growth of between -0.5% and 0.8% in 2023. For Gabriel Attal, the IMF is maintaining its growth forecast “because he knows that we have the determination to continue to act for our economy“.

Aid targeting

Still, the IMF also fearsa slight widening of the deficitin 2023, citing the extension of energy measures and the continuation of the elimination of production taxes for companies. Targeting energy aid could “largelyallow a fiscal tightening of a quarter of a point of GDP, calculates the IMF, also suggesting a possible postponement of production tax cuts.

Other avenues for reducing public spending and ultimately the deficit, according to Mr. Franks: pension and unemployment insurance reforms, as well as the reduction of tax loopholes. “We will implement“The first two reforms, hammered Monday Bruno Le Maire, while the Minister of Labor Olivier Dussopt has just presented to the social partners the new rules for calculating unemployment benefits.

Jeffrey Franks also insists on “clarify who takes care of whatbetween government and local authorities, in order to avoidduplication of expenditure between central government and local governments“. In the long term, the French deficit should remain above the level at which it stabilizes the debt, worries the IMF. The Washington institution therefore calls for “a sustained adjustmentto 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.

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