France: Low inflation

After falling by 2.2% in 2009, real GDP is projected to grow slowly, by 1.4% in 2010 and 1.7% in 2011, led by business investment and exports. This will not be enough to prevent the unemployment rate from rising until the beginning of 2011, resulting in inflation of below 1% per year. Households have reacted to rising job and financial-market uncertainty by increasing their saving, offsetting the positive impacts of higher public transfers and improved terms of trade.

A mix of appropriate discretionary measures and automatic stabilisers has cushioned the impact of the crisis. The investment tax cut embedded in the 2010 budget is also welcome, but additional spending should now be resisted. Designing and clearly communicating a credible multiyear exit strategy is a priority. The needed consolidation represents an opportunity to rebalance public finances by cutting inefficient spending, increasing inheritance, property and carbon taxes and further reforming the pension system.

©OECD Observer 2010

Economic data

GDP growth: -1.8% Q1 2020/Q4 2019
Consumer price inflation: 0.9% Apr 2020 annual
Trade (G20): -4.3% exp, -3.9% imp, Q1 2020/Q4 2019
Unemployment: 8.4% Apr 2020
Last update: 9 July 2020

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