Could the French economy be in trouble in a few years? - Natixis

According to Patrick Artus, Research Analyst at Natixis, it is hoped that the numerous reforms being implemented in France will increase the country’s employment rate and potential growth within a few years.

Key Quotes

“But if the effect of these reforms is small or comes late, then there would be reason to be concerned over the French economy’s prospects in a few years:

• The trend in hiring difficulties shows that the structural unemployment rate is high, and that growth is going to return to the low level of potential growth;
• Domestic supply of goods and services remains unresponsive, which results from problems of weak corporate modernisation, low labour force skills and declining cost competitiveness, and may lead to a sharp deterioration in France’s foreign trade;
• If potential growth remains low, given the policies being implemented, France’s fiscal deficit will become high again, probably forcing the government to run a markedly restrictive fiscal policy.”

“Putting aside the effects of the reforms, the French economy in 2020- 2021 could therefore be characterised by low growth, a high external deficit and the need for fiscal austerity.”