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2019 OECD Economic Surveys: France 2019

image of OECD Economic Surveys: France 2019

France's economic growth has slowed down after a gradual recovery. Limited productivity and employment gains have reduced the growth of GDP per inhabitant; public spending remains very high. Reducing public expenditures is needed to put debt on a firmly declining path. This and streamlining the tax system would also help reducing taxes, which would boost economic activity eventually. Continuing to foster a more flexible labour market would lead to higher productivity growth and living standards. The unemployment rate is particularily high for low-skills, and young and older workers: higher skills and better education outcomes would support a more inclusive labour market and intergenerational mobility. The quality of the public capital stock is high in France: improving its maintainance would strengthen this asset. New investment should help drive the economy towards greener growth – in particular investments in energy and transport – and more digitalisation. This should be achieved by applying rigourous cost-benefit analyses even more widely.

SPECIAL FEATURES: LABOUR MARKET PERFORMANCE; PUBLIC INVESTMENT

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Improving the efficiency of public investment

Public investment can stimulate demand in the short term and suitable infrastructure can also raise productivity and contribute to more inclusive economic growth by ensuring equal access to the labour market, education and health care. France makes substantial public investments and its stock of public capital is large. In particular, France’s infrastructure network is well developed and ranks favourably in international comparison. Yet, the capital efficiency of existing infrastructure may have been hampered by a lack of maintenance and upgrading investments in some sectors. To take full advantage of its public investment, France must strengthen and develop its strategy to meet several challenges, including by promoting socioeconomic-efficiency considerations in the selection of investment projects, harmonising procedures extending over the life-cycle of investment projects between sectors and administrative levels, and concentrating investments of some sectors on the maintenance and quality of the capital stock. Moreover, as local governments are responsible for most of public investment, continuing efforts to clearly allocate responsibilities across the different levels of government will be helpful to reap the benefits of economies of scale and scope. Public investment should also be geared towards fulfilling environmental, digital, and research and innovation objectives to meet France’s domestic and international commitments and secure stronger and more sustainable growth. Public investment choices will need to crowd-in private investment to meet these objectives and raise potential growth, including by developing a pipeline of ready-to-finance projects and dynamically adjusting public support to energy and climate change policies.

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