Political uncertainty, persistent in France since the dissolution of the National Assembly in June 2024, has an impact on household and business spending and “contributes to a deterioration in growth,” which is already weak, the IMF’s chief economist, Pierre-Olivier Gourinchas, warned on Tuesday.
“Political uncertainty, the difficulty in setting a budget and charting a budget path, all of this has an impact on investment decisions and household confidence. French households and companies are in a very expectant position, which contributes to deteriorating growth,” said Pierre-Olivier Gourinchas, in an interview with AFP.
Still modest growth
The International Monetary Fund (IMF) published this Tuesday its growth forecasts, which remain very gloomy for France, forecasting only 0.7% (+0.1%) this year, before a very slight improvement to 0.9% in 2026 (+0.1 points), which remains below the euro area average, where growth of 1.2% is expected, or 0.2 points more than in previous forecasts. published by the Washington institution in July, and to 1.1% next year, this time with a drop of 0.1 points.
Spain, the most dynamic economy among the main advanced countries, should even see its growth jump to 2.9% this year (+0.4 points compared to July), before advancing 2% in 2026 (+0.2 points). The fourth largest economy in the euro zone benefits from the good health of household consumption and investment despite the climate of uncertainty caused by the increase in customs duties in the United States, to which it exports relatively little.
Germany, the largest economy in the euro zone, should experience, after two years of recession, growth slightly above the IMF’s previous expectations, at 0.2% (+0.1 points).
“We will have to consider the question of the level of global spending”
The progression of French activity is “insufficient if we want to solve the problems of public finances through growth,” warned the Fund’s chief economist. Therefore, an effort must be made and “from our point of view, it must be in the expenditure part and not in the income part”, with “gradual and accepted” measures, avoiding “austerity measures that could kill growth.”
But, Pierre-Olivier Gourinchas insisted, “the country will more easily accept the effort that must be made if it is shared by everyone. The question of tax justice is totally legitimate.” However, given “the magnitude at stake (…), we will have to consider the question of the level of overall spending, in particular of social protection financing systems,” warned Pierre-Olivier Gourinchas.
President Emmanuel Macron re-elected Sébastien Lecornu as prime minister this Sunday, who assured that the priority was “to give France a budget before the end of the year.” The declared objective of the two finance bills, that of the State and that of Social Security, is to keep the deficit below 5% of GDP, compared to 5.4% in 2024, instead of the 4.7% initially planned, to have room for negotiation with the opposition. But the new government could have a limited duration, while the LFI and RN groups have already presented motions of no confidence.
Source: BFM TV
