france : economic developments and reforms, where are we
TRANSCRIPT
The Economic Club of New York : 18 April 2018
France : Economic developments and reforms, where are we heading ?
François VILLEROY de GALHAU, Governor of the Banque de France
1
WHERE ARE WE STARTING FROM ? SLOWDOWN IN POTENTIAL GROWTH
2
SOME STRONG FRENCH ASSETS (1/2): CAPITAL AND INNOVATION
Fastest-growing technology companies in Europe, the Middle East, and Africa (EMEA) during the past four years. Growth for individual companies on the list ranged from 220 percent to 107,117 percent. Winners were selected based on percentage fiscal-year revenue growth from 2013 to 2016.
3 Source : Deloitte
Source : OECD
Source : OECD
10.5
11.0
11.5
12.0
12.5
13.0
13.5
14.0
2002 2004 2006 2008 2010 2012 2014 2016
United States France Germany
Private non-residential gross fixed capital formation (% of GDP, OECD)
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2002 2004 2006 2008 2010 2012 2014 2016
United States France Germany
Government gross fixed capital formation (% of GDP, OECD)
SOME STRONG FRENCH ASSETS (2/2): LABOUR
4
Source: Eurostat
5
1. A favourable momentum : a robust upturn creates an appropriate timing for reforms
2. This momentum is being harnessed to implement ambitious and consistent reforms
6
A POSITIVE CONFIDENCE SINCE SPRING 2017
Source: IPSOS; survey on attractiveness among executives of foreign firms in France
88
92
96
100
104
108
112
88
92
96
100
104
108
112
2015 2016 2017 2018
Consumer confidence
Source: Insee monthly consumer survey100= long term average
96
98
100
102
104
106
108
96
98
100
102
104
106
108
2015 2016 2017 2018
Business sentiment in manufacturing
Source: Banque de France monthly survey in manufacturing100= long term average
7
STRONG RECENT PERFORMANCE OF THE FRENCH ECONOMY AND SUPPORTIVE MEDIUM TERM PROSPECTS
GDP growth and its components (%/pp)
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
2010 2012 2014 2016 2018 2020
GDP growth
Private consumption
Private investment
Public demand
Net exports
Inventories
GDP growth (%, YoY and annual average)
Strong GDP growth in 2017 (2.0% after 1.1% in 2016).
GDP growth should then remain above its potential rate, at 1.9% in 2018, 1.7% in 2019, 1.6% in 2020.
Growth should be more balanced: rebound in exports in 2018 and dynamic domestic demand over the entire projection horizon.
Source : Insee, Banque de France projections
0.8
1.2
1.6
2.0
2.4
2.8
0.8
1.2
1.6
2.0
2.4
2.8
I II III IV I II III IV I II III IV I II III IV I II III IV
2016 2017 2018 2019 2020
GDP growth March Forecast - YoY
GDP growth December Forecast - YoY
GDP growth - Annual average
8
THE UNEMPLOYMENT RATE SHOULD FALL TO JUST BELOW 8.0% AT END-2020, ITS LOWEST LEVEL SINCE END-2008
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
2010 2012 2014 2016 2018 2020
Quarterly changes in employment (in thousands)
Unemployment rate (% of labour force)
Source : Insee, Banque de France projections
2017 was marked by significant employment gains, with 276,000 new jobs. This trend should continue over the projection horizon, with between 180,000/200,000 new jobs expected to be added each year, despite the 2018 cut in subsidized contracts.
In 2019 and 2020, market sector employment should be supported by the transformation of the CICE tax credit into a permanent cut in employer social security contributions.
-60
-40
-20
0
20
40
60
80
100
-60
-40
-20
0
20
40
60
80
100
2010 2012 2014 2016 2018 2020
Non-market sector employment
Market-sector salaried employment
Non-market sector salaried employment
Total job creations
9
THE PAY-OFFS OF REFORMS IN EUROPE
GDP, cumulated growth over 2014-2017 (%)
*except Ireland.
Employment, cumulated growth over 2014-2017 (market economy, %)
10
1. A favourable momentum : a robust upturn creates an appropriate timing for reforms
2. This momentum is being harnessed to implement ambitious and consistent reforms
PUBLIC FINANCE
11
Source: Eurostat
Source: Eurostat, based on COFOG nomenclature
Some ongoing reforms • Public deficit down to 2.6% in 2017 (from
3.4% in 2016)
• Reduction of the tax burden on corporate income (to 25% in 2022) and capital
AMBITIOUS LABOUR MARKET REFORMS
12
Widen the negotiation space given to social partners for decision-making: – Social partners become the true actors of the effective
labour regulation
– This process can reconcile efficiency and worker protection
Simplify staff-representation obligations: Enlarge the negotiation field and hence ease compromise
Reduce the uncertainties of labour disputes and better secure labour relations: – Cap severance pay in case of abusive lay-off
– New type of collective layoff by mutual consent
A BETTER-FUNCTIONING LIFELONG TRAINING AND APPRENTICESHIP SYSTEM
13
Sources: Apprenticeship: Germany: BiBB ; France: INSEE ; Italy: Report Cedefop Italy ; unemployment data: Eurostat.
Apprenticeship and youth unemployment rate (2016)
Source : DARES, INSEE
Vacant employment and unemployment rates
Some ongoing reforms
• Reform of primary and secondary education • Reform of academic orientation • Reform of apprenticeship • Reform of lifelong training
LABOUR MARKET REFORMS INTERRELATED WITH PRODUCT MARKET REFORMS
14
Source : OECD
Reforms done:
‘Macron law’ (2015)
Railway reform underway
15
FOUR ACCELERATORS OF THE ECONOMIC UNION
National reforms
Macroeconomic accelerator: A collective economic strategy,
A precautionary-oriented instrument, a euro area investment budget
Fiscal accelerator: Euro area investment budget
Microeconomic accelerator:
A Financing Union for Investment and Innovation
A
S
Allocation function
A S A S
S
Stabilisation function
Institutional accelerator: Euro area Finance Minister
RULES-BASED MULTILATERAL ORDER
16
France is heading in the right direction…
…and at a fast pace with a strong government commitment to reforms.
The European and international environments need to remain supportive.
In particular, we need to maintain an open international environment, a rule-based multilateral order.