European Commission
8 February 2016

European Commission’s economic forecasts for France

The European Commission has published its latest economic forecasts for France. The forecasts indicate that in 2015 the effects of recovery were felt in terms of growth and that France is set to honour and indeed exceed its commitments on deficit for the second consecutive year. Overall, France is deemed compliant with the common rules as regards the state of its public finances.

Content published under the Government Valls II from 2014 26th August to 2016 11th February
 
The European Commission has published its latest economic forecasts for France, which notably highlight the following with regard to 2015:
 
  • For the second consecutive year, in 2015 France is set to honour and indeed exceed its commitments on deficit. While the Commission recommended a deficit of 4%, the anticipated figure is now 3.7% (to be confirmed in late March).
  • 2015 will be the first year in which the effects of recovery are felt, with 1.1% growth following three years of stagnation. The Government's objective of 1% – a target agreed in the summer of 2014 that was at the time deemed optimistic by observers in the High Committee of Public Finances (HCFP) – has been achieved and indeed exceeded.
  • Admittedly, this 2015 growth will likely be slightly below the average across the eurozone (estimated at 1.5%; the exact figure is to be confirmed on 15 February), but it is important to remember that the situation across the various Member States varies greatly. Germany, of course, has achieved good results since it has successfully implemented the necessary reforms in good time, something that we are now endeavouring to do. Spain is experiencing strong growth, which is welcome following such a recession, but still has a long way to go given that its activity remains significantly below 2008 levels. Italy is also struggling to recover from several years of recession.
 
2016 forecasts show the following:
 
  • France is set to honour its commitment to bringing the deficit down to 3.4% in 2016, bearing in mind that 3.3% was the objective set in the 2016 Budget Bill (projet de loi de finances or PLF). France is honouring its commitments through a markedly sensible and prudent budget policy, as well as a consolidation of public finances that is compatible with a return to growth, as outlined in late 2014.
  • The Commission revised its growth forecast from 1.4% to 1.3% to account for the risks presented by the international climate. This minor revision of 0.1% is still marginal, particularly as the figure for the fourth quarter was not known at the time of the forecast. Furthermore, this downward revision is not restricted to France; it applies to the entire eurozone, including Germany and Italy to the same extent.
  • The Commission has not taken into account the Employment Pact outlined in late January, which explains why unemployment remains stable in 2016.
  • It should also be noted that inflation will be lower than expected. Michel Sapin notes that there will correspondingly be a significant downward revision in the forecasts. This being the case, he stresses that the public deficit objectives for 2016 will be adhered to, as were the targets for 2015, with adjustments made if need be, as was the case in 2015.
  • Furthermore, the minister declared that in sum there is no longer any benefit to be derived from a fall in oil prices. The destabilising effects would outweigh the benefits for the economy. As he explains, "when it decreases, it's obviously a good thing for all of us. But when it drops too low it has a destabilising effect on the global economy, particularly for countries that live primarily on their oil exports".
 
Looking ahead to 2017, the Commission anticipates a further acceleration in growth. As far as the deficit is concerned (above the target of 3%), it is far too early to judge, particularly as the Commission does not take into account the savings plan in its entirety (forecasts are based on an 'unchanged policy'). With this in mind, it is important to remember that this methodological problem arises every year: in its February 2015 forecast, the Commission anticipated a deficit of 4.1% for 2016, based on an unchanged policy, compared to the more favourable current figure of 3.4%.
 
Overall, France is deemed compliant with the common rules as regards the state of its public finances.

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8 February 2016