The National Reform Programme 2015
London, 21 April
The French economy has many strengths, including its institutional framework, the top-rate infrastructure across its territory, its financial system, the quality of its workforce and its positive demographic trends. Productivity per hour worked is one of the highest in the world. All these aspects are essential for its competitiveness and thus its growth, both now and in the future.
However, these unquestionable qualities cannot mask considerable economic challenges. France knows that it needs to address them; it is undertaking and will continue to undertake ambitious reforms, to create the conditions for sustainable, fair and job-rich growth, in line with the Europe 2020 strategy.
Moreover, the coordination of economic policies is absolutely necessary in a monetary union, and the aim of this National Reform Programme is also to serve as a basis for debate in the framework of the European Semester.
France is therefore implementing a long-term reform strategy. The approach was deliberately chosen not to be a sharp break with the past; on the contrary, it involves generating momentum involving a series of targeted, coordinated and effective reforms, all with one ambition: to modernize, simplify and free up economic activity, so that it can restart fully and sustainably.
The public finances strategy, described in the stability programme, ensures that the public deficit will return below 3% of GDP in 2017.
The economic strategy detailed in the National Reform Programme is being implemented through determined efforts, especially as regards price competitiveness, with reduced employer contributions and taxes, and non-price competitiveness, with the simplification of administrative procedures, the repeal of unnecessary regulations that are a barrier to activity, support for investment and innovation, and improved functioning of the labour market.
Above and beyond the strategy to restore business competitiveness, the government’s reform agenda includes two other priorities: combating inequality and preparing for the future.
The first results are already being felt. The current account deficit has been reduced to only 1% of GDP as of 2014, while the rate of taxes and contributions paid by businesses began to fall in the same year. Business margins, for their part, are set to increase considerably in the first half of 2015 thanks to control of labour costs. And after three years of stabilization, Foreign Direct Investment decisions in France increased by 8% in 2014, which is a sign of improved attractiveness.
Overall, these reforms should strengthen the French economy’s potential and long-term resilience.
In October 2014, the OECD assessed the impact of the reforms already undertaken at 3 GDP points in a 10-year time horizon. Once the reforms to be undertaken by early 2016 are taken into account, ongoing assessment suggests that the total impact should be at least some 4 GDP points by 2020, with significant effects on short-term potential growth.