OECD Economic Survey of France 2021 - Presentation

2021 OECD ECONOMIC SURVEY OF FRANCE Ensuring a steady, inclusive and

more sustainable recovery 18 November 2021

@OECDeconomy @OECD

https://www.oecd.org/economy/france-economic-snapshot/

Key messages

Strengthen the framework and the evaluations of fiscal policies

Develop human capital over the life course for stronger and more inclusive growth

Implement a comprehensive strategy to accelerate the green transition in a fair and effective way

2

Strong public policies have supported a fast rebound of economic activity

3

Economic activity rebounded quickly Real GDP, index 2015Q1 = 100

Source: OECD Economic Outlook: Statistics and Projections (database) and updates.

4

The fall in employment was limited Difference in employment rate compared to 2019Q4, % points

Source: Eurostat (2021), Employment and Unemployment (LFS/EFT).

5

Strong public support limited the economic and social shock A. The take-up of the job retention scheme % of salaried staff, end May 2020

B. Support for business liquidity % of GDP

Source: OECD Economic Outlook: Statistics and Projections ; Banque de France (2021), Financial situation of households and businesses.

6

The acceleration of the vaccination campaign has been massive Share of people who received at least one dose of the vaccine Extension of the COVID health pass

Source : Our World in Data (2021), Share of people who received at least one dose of COVID-19 vaccine.

7

Recovery measures aim at stronger growth Announced recovery measures % of 2019 GDP1

1.

The measures announced cover only measures that impact the budget balance up to end-2027 at most.

Source: OECD estimations.

8

The recovery is rapid Pourcentage changes, volume (or indicated) 2020

2021

2022

-8.0

6.8

4.2

Unemployment rate (%)

8.1

7.8

7.6

Consumer price index¹

0.5

1.9

1.7

-9.1

-8.0

-5.0

115.2

115.2

115.3

Gross domestic product (GDP)

General government financial balance (% of GDP) General government gross debt, Maastricht definition (% of GDP) 1.

Harmonised index.

Source: OECD (2021), Economic Outlook: Statistics and Projections (database) and updates.

9

Inflation has increased sharply Y-o-y % changes

Source: OECD (2021), OECD Economic Outlook: Statistics and Projections (database) and updates; and Eurostat.

10

The declining savings rate supports the recovery Consumption and savings rate 2019Q4=100

Source: OECD Economic Outlook: Statistics and Projections (database) and updates.

11

Key recommendations for a strong and sustainable recovery Quickly implement the recovery plan and the investment plan for 2030.

Provide increasingly targeted support prioritising investment in physical and human capital.

Strengthen lifelong learning and support for labour market integration, especially for young people and older workers.

12

An ambitious reform of the fiscal framework is necessary

13

Public debt is projected to stabilise at an historically high level Public debt (Maastricht definition) % of GDP

Source: OECD (2021), OECD Economic Outlook: Statistics and Projections (database) and updates.

14

Public debt projections are sensitive to a potential rise in interest rates Public debt projections Maastricht definition, % of GDP

1. Assumptions of the OECD long-term model: the primary deficit of -7.8% of GDP in 2021 declines progressively until 2050 and the -4.4% difference between interest rates and nominal growth in 2021 stabilises at -0.3% between 2045 and 2060. 2.

125 basis points increase above the main scenario in 2025 and from 2025 to 2060. 3. GDP level increasing by 1.2% over 10 years and a 1.5% of GDP fall in deficit.

Source: OECD calculations.

15

The public spending ratio is the highest in the OECD Public spending in % of GDP

Source: OECD, Economic Outlook.

16

The structure of spending does not make enough room for investment Share of expenditure in GDP, 2019

1.

In the sense of social spending (SOCX). 2. Except below primary education 3. Executive and legislative bodies, provision of general services such as administrations costs and some public services (maintenance of public spaces, waste treatment etc.)

Source: OECD calculations.

17

Some public expenditures are not sufficiently effective Variation in students’ reading performance explained by their socio-economic status, %

Source: OCECD (2019), OECD Programme for International Student Assessment (PISA).

18

Key recommendations for the governance of public finances Rationalise public expenditures in the medium term based on spending reviews and evaluations of their effectiveness.

Strengthen the fiscal framework with more transparency and controls, notably:  Implement a multi-annual spending rule.  Publish long-term debt projections.

19

Ensuring a stronger and more inclusive recovery

20

Education and training issues hinder productivity gains Annualised productivity growth, 1999-2019

Source: OECD (2021), Productivity statistics (database).

21

Job vacancies are increasing despite high unemployment Unemployment rate and job vacancies % of active population

% of jobs

Source: Dares (2021), Vacancies in the second quarter of 2021; Insee (2021), Unemployment rate.

22

The employment rates of youth and older workers are low Employment rates by age groups, 2019

Source: OECD (2021), Labour market statistics (database).

23

Education strongly impact labour market integration Employment rates of recent graduates (15-34 year olds), 2019

Source: Eurostat (2021), Detailed annual results of labour force surveys, Eurostat.

24

Student skills have declined Mean score of 15-year-old students

Source: OECD (2019), OECD Programme for International Student Assessment (PISA).

25

Training programmes for the digital economy should be developed further % small businesses (10-49 employees) offering ICT training to their employees

Source: OECD (2020), ICT Access and Usage by Businesses in 2018 (database) and OECD (2020), OECD Telecommunications and Internet Statistics (database).

26

Improving support for R&D is crucial to revive productivity SME share in direct government funding of Business R&D expenditure (BERD)

Source: OECD (2021), OECD R&D Tax Incentive Indicators in 2018 (http://oe.cd/rdtax) and OECD (2021), Research and Development Statistics (database).

27

Local unemployment rates are unequal and persistent Local unemployment rates, 2006

Local unemployment rates, 2018

Source: France Stratégie (2020), Taux de chômage et zones d’emploi : vers une nouvelle approche de la performance territoriale.

28

Inequality remains concentrated within large cities Decomposition of disposable income inequality Theil index, contribution by type of area

Inequality

Source: Goujard A. et Loriaux, C. (forthcoming), Trends in regional income disparities in France from 1996 to 2017, OECD Technical background paper.

29

Key recommendations for a stronger and more inclusive recovery Expand the supply of childcare services for disadvantaged households and neighborhoods.

Increase the share of work-based training for apprentices.

Support training in digital technologies for small businesses.

Make sure that the extension of the youth guarantee combines monetary allowance, efforts to integrate and access to social rights.

30

Key recommendations for a stronger and more inclusive recovery Encourage longer work careers, in particular, by extending the minimum retirement age.

Provide funding for job-search support agencies adapted to the needs of the economy.

Refocus housing supply development policies on the densest areas.

Develop back-to-back actions aimed at precarious populations.

31

Implement a global strategy to accelerate the green transition

32

Economic losses due to extreme climate-related events are high Losses due to environmental disasters per capita between 1980 and 2019, in euros at 2019 prices

Note: The figures vary according to the proportion of damage that is insured and do not therefore reflect the real cost of damage.

Source: Based on records from the NatCatService provided by Munich Re and Eurostat structural indicators.

33

The gap between the results and the objectives is widening Greenhouse gas emissions Index 1990=100

Note: The objectives represented in the figure are OECD estimates.

Source: European Commission, Energy Data (database).

34

Emissions come mostly from transport, agriculture and buildings Greenhouse gas emissions by sector, as a percentage

1. Sectors where a small share of emissions are covered by a carbon price of at least 60 EUR per tonne – the reference cost for the society of a tonne of CO2 emissions in 2020.

Source: OECD Environment Statistics, 2018.

35

Norms and other instruments must accelerate emissions cuts in transport Share of electric cars Percentage

Note: Data for 2021 in panel B is preliminary and the data for other countries is likely to change too.

Source: European Environment Agency, 2019.

36

Low social acceptance can be an obstacle to environmental policies “Do you support the following measures?”

Source: Decheleprêtre, Fabre, Kruse et Stancheva (forthcoming). Preliminary results: Weighted, representative sample of 1 691 observations.

37

Transparency in the use of carbon tax revenues could improve acceptance “Do you support a carbon tax if the revenues are used to…?”

Source: Decheleprêtre, Fabre, Kruse et Stancheva (forthcoming). Preliminary results: Weighted, representative sample of 1 691 observations.

38

Key recommendations for a more sustainable growth Gradually withdraw exemptions and reduced rates on environmental taxes, fairly and equitably.

Progressively align carbon prices across sectors, while adopting measures to increase their social acceptability.

Continue international collaboration efforts towards a standard and harmonised definition of « green » investments.

39

Key recommendations for a more sustainable growth Make the eligibility criteria for the conversion premium and the ecological malus scale more stringent.

Make aid conditional on achieving a minimum energy efficiency standard and tighten controls.

Reallocate support to the agricultural sector towards payments for agro-environmental services.

40

For more information Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

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