France: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for France

The 2022 Article IV Consultation discusses that France saw a robust recovery from the coronavirus disease 2019 shock but is now facing the repercussions of Russia’s war in Ukraine. The large fiscal response to the energy price shock has cushioned the economic impact but has been costly, poorly targeted, and distortionary. IMF estimates growth at 2.6 percent in 2022 and 0.7 percent in 2023, with inflation averaging 5.9 and 5 percent, respectively. Near-term risks to the outlook are tilted to the downside, dominated by possible further impacts of Russia’s war against Ukraine. Under current policies, the fiscal deficit is expected to narrow as support is phased out and the economy recovers but will remain elevated at 4 percent of gross domestic product in the medium term. Labor-market policies should ensure smooth transition of apprentices into permanent work while addressing skills shortages and inferior educational outcomes. Continuing structural reforms, particularly in pensions, unemployment, and product and services markets will be essential for future fiscal health as well as better competitiveness and growth. The energy crisis presents an opportunity to accelerate the green transition through energy conservation and a faster switch to renewable energy.