IMF: Brexit cost a quarter of a point of growth in 2017 – Les Echos

The International Monetary Fund (IMF) has revised copy of its annual report on France, from a mission in May. Meanwhile, the Brexit’s been there. The planned output of UK EU will cost a quarter of a point of growth within the next year. This was said Tuesday Mumssen Christian, deputy director of the IMF’s European department. “We maintain our forecast of 1.5% growth for this year. But in view of the uncertainty of Brexit will affect investment spending in France without forgetting the slower growth in the UK that will impact on its trading partners, GDP growth in France will be only 1.25 % “, he said.

very slow decay rate of unemployment

the bulk of the report confirms a preliminary observation made in May: fiscal consolidation and labor market are the two main concerns of the multilateral institution. On employment, the unemployment rate is still 10% this year. It will decline only slowly to 9.1% in 2019. This pitiful performance … first from a structural unemployment estimated by the IMF at around 8.5% of the working population. Then, the Fund considers the French labor market less adaptable to changes in the global economy. Centralized labor agreements in more than 700 branches, long and uncertain legal proceedings on the dismissal, relatively easy access to unemployment benefits, minimum wages too high … the list is long. The organization welcomes the reforms namely citing the pact of responsibility and solidarity, the IECC, the Macron laws, Rebsamen and lately the El Khomry law. But too many barriers to hiring persist. Further reforms are to be taken: extending the minimum contribution period of four months now; unify two years the unemployment benefit period; make decreasing allocations. It would also tighten the rules on the acceptance of satisfactory jobs for a person looking for a job and change the minimum wage calculation rule limiting indexation to inflation in times of high unemployment .

fiscal policy “on the razor’s edge”

Côté public finances, the IMF expressed skepticism about french government commitments. “We have no doubt about the willingness of the government to achieve a budget deficit of 3% of GDP next year. But this goal will be difficult to achieve given the additional spending announced. They will grow more than 1%. We recommend anchoring at the inflation rate “, said Christian Mumssen. The IMF also announced an increase in debt will peak at 97.9% next year, against 97.1% this year, before beginning a slight decline. For the Fund, “fiscal policy is on the razor’s edge” . The structural fiscal adjustment (excluding the effect of the economy) slowed in 2014-2015 and will be even zero between 2016 and 2018 will alarm the IMF. If were to come to an impact on economic growth or a relaxation of the measures to be implemented, “fiscal dynamics could well derail” , warns the IMF.

Richard Hiault

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