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France: an illustration of the interdependence of reforms 11/5/2018
The Macronomics, which refer to and encompass the series of structural reforms and fiscal policy measures implemented by Emmanuel Macron administration, aim to both « liberate and protect » firms and individuals in order to boost growth and employment. The support to supply is an important cornerstone of this policy, backed by some stimulus to demand. These Macronomics address multiple challenges all at once, each block (labor market, firms, households’ purchasing power, State intervention, and Great Investment Plan) interacting with the others with a strong interdependence. Some of these reforms are already in force (labor law, taxation), others have just been passed (law for freedom to choose one’s professional future, PACTE law) and others are work in progress (State reform, pensions reform). While one can expect these reforms to yield significant positive results, these latter will show up over the long term. To go further Read the paper by Hélène Baudchon: France: First overview of the 2019 budget
France: Real-time estimate of the output gap 10/31/2018
Determining the cyclical position of an economy is a necessary but uncertain exercise because of the difficulty to estimate the benchmark, i.e. the output gap. The mobilisation of various indicators of tensions coming from the INSEE business confidence surveys (capacity utilisation rate and the balances on opinion related to labour slack and to insufficient demand in industry, services and construction) is one way to get around these pitfalls and to build a direct real-time estimate of the output gap with the further advantage of not being subject to data revisions.   This alternative approach replicates well the European Commission estimate of the output gap, thereby allowing considering its recent evolution as a better gauge of the cyclical position of the French economy. This way the cycle looks more mature than what the traditional estimate of the output gap reveals. And quarterly data even show signs of plateauing, which could be early indications, not of the end of the cycle, but of its possible peak.
Rebound in sight 10/19/2018
Still tentative one month and a half ago, signs of the expected growth rebound in Q3 are clearer today. Except consumer confidence (which surprised on the downside and stands below its average), the other indicators related to Q3 (business confidence, production and consumption) surprised on the upside and stand above their average.
Growth is benefiting from internal supports 10/18/2018
After a market soft patch in the first half of 2018, growth in France will probably get some colour back in the second part of the year, despite a less supportive external economic environment. Consumer spending should get a boost from tax cuts and increases in social minima planned for the end of the year. This positive impact is expected to last into 2019, buffering the growth slowdown. Other fiscal stimulus measures will also be at work, and the first results of the labour market reforms and the ‘PACTE’ growth and business reform act could start to show up.
First overview of the 2019 budget 9/24/2018
Faced with slower than expected growth, the government has raised its fiscal deficit forecasts for 2018 and 2019. It is now looking for a deficit of 2.6% of GDP in 2018 and 2.8% in 2019 (up from 2.3% and 2.4%, respectively, in the April 2018 Stability programme). The wider 2019 deficit can be attributed to the transformation of the CICE tax credit into reduced employers’ contributions, which has a fiscal cost of about 1 point of GDP. It masks an improvement in the structural deficit, estimated at about 0.3 points, thanks to efforts to reduce spending. The CAP 2022 recommendations, issued by experts on the Public Action Committee, were not followed in extenso, although they did serve as a source of inspiration for a series of government measures. Yet these latter have been disclosed little by little, making it impossible, for the moment, to have a comprehensive vision of the whole.
France: some guidance on the 2019 budget 9/21/2018
Faced with slower than expected growth, the French government has raised its fiscal deficit targets.
A still mixed dataflow over the summer 8/31/2018
After a first half marked by a sharp slowdown in growth, signs of the expected acceleration are still tentative.

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