IMF Says Macron Reforms Crucial for French Growth

The government of French President Emmanuel Macron needs to make good on its reform promises if it wants a shot at boosting growth durably, the International Monetary Fund said Thursday.

As the French economy picks up after a long period of slow growth, conditions are now favorable for Macron’s plan to overhaul the labor market, cutting deficits and lowering taxes to make a real impact, the IMF said in a report on France, AFP reported.

Now everything is down to those plans becoming reality, the lender cautioned. “Medium-term prospects will critically depend on the implementation of the reform agenda,” it said.

Meanwhile, the French economy is picking up pace, with the IMF projecting 1.6% growth of the gross domestic product this year, rising to 1.8% in 2016, after just 1.2% last year.

“There is now an important window of opportunity for a bold and comprehensive strategy to boost growth, reduce unemployment, ensure the sustainability of public finances, and improve competitiveness, while also promoting inclusiveness and social mobility,” the IMF said.

The report said implementation of the program will be the “key challenge”, especially with regards to fiscal overhaul and labor market reforms. But it is precisely labor reform that has become a major bone of contention back in France, with unions having staged big protests and announcing more.

Thursday saw new protests against an overhaul of the country’s labor code as unions hope to build pressure on Macron days before his signature reform is expected to become law.

But the IMF said that if Macron manages to get his way, the economic rewards could be substantial. “Comprehensive labor, tax, and spending reforms would help raise potential growth and boost employment while rebuilding room for fiscal maneuver,” the Washington-based body said.

Meanwhile, France’s second-quarter gross domestic product grew by 0.5% compared to the previous quarter, in line with earlier official estimates. Higher consumer spending buoyed the overall economy, the national statistics agency said, RTE reported.

The GDP growth of 0.5% was the third consecutive quarter that the economy had expanded by that amount, according to statistics body INSEE.

INSEE also said that French corporate profit margins increased slightly over the second quarter. INSEE has forecast economic growth in France this year of 1.6%, the strongest since 2011, as foreign trade proves less of a drag and the unemployment rate falls.

The OECD also raised this week its forecast for France’s 2017 economic growth, revising it up to 1.7% from 1.3% previously.