OECD Economic Surveys: France 2024

Executive summary

Economic growth has proven resilient but remains weak

France has faced two significant, successive shocks: the COVID-19 pandemic and the increase in inflation. Government support measures have been decisive in protecting businesses, jobs and purchasing power, but at a high fiscal cost. Gradual disinflation is expected to support a moderate economic recovery by 2025.

Economic activity had regained pre-pandemic levels in 2021 but slowed in 2022 and 2023. After emerging in the context of the post-COVID-19 recovery, inflationary pressures have been exacerbated by Russia’s war of aggression against Ukraine and have restrained private consumption in France and other OECD countries. The tightening of monetary policy in response to rising prices has led to a deterioration in financing conditions for businesses and households, which has curbed private investment and consumption. At the same time, business investment has been buoyed by substantial public support.

After having provided massive support to businesses and households during the pandemic, France also took strong measures to limit price increases. Inflation was high in 2022 and 2023, but less than in the euro area as a whole, and the purchasing power of households was preserved over both years. The budgetary cost of these measures amounted to a cumulative 2.9% of GDP over the two years.

Figure 1. GDP growth has slowed

Real GDP, Index, 2019Q4=100

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

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Disinflation and a mild improvement in the global economic outlook will support a modest recovery (Table 1). In 2024, subdued external demand will limit exports while higher financing costs will continue to reduce private investment and consumption. In 2025, easing inflation and a moderate recovery in foreign demand will allow growth to gain some momentum. Unemployment is expected to increase slightly between 2023 and 2025.

Risks to economic activity are balanced. Geopolitical tensions could intensify and lead to a rise in energy prices, which would weigh on economic activity. Financial risks, including in the real estate sector, warrant vigilance, despite an overall solid financial situation of households, businesses and banks. Upside risks include sizeable household savings accumulated during the pandemic which could boost private consumption. Exports, particularly in the aeronautical sector, could catch up faster than expected.

The budget balance deteriorated and public debt rose markedly during the COVID-19 pandemic. A recent public spending review identified in 2023 potential savings of around 0.4% of GDP per year by 2027, and new spending cuts have been decided for 2024, amounting to 0.7% of GDP. The pension reform introduced in 2023 will also help reduce spending.

Table 1. GDP growth will remain modest

Annual growth rates, %, unless specified

	2022	2023	2024	2025
Real GDP	2.6	1.1	0.8	1.3
Private consumption	3.2	0.9	1.2	1.9
Govt consumption	2.6	0.8	0.4	0.4
Investment	0.1	0.7	-0.9	0.8
Exports	8.3	2.5	2.8	1.8
Imports	9.1	0.7	-0.2	1.7
Unemployment rate (% labour force)	7.3	7.3	7.6	7.7
Inflation (CPI)	5.9	5.7	2.3	2.0
Govt balance (% GDP)	-4.7	-5.4	-5.1	-4.3
Public debt (% GDP, Maastricht definition)	111.3	109.7	112.8	114.7

Source: OECD Economic Outlook database.

Additional efforts are vital to lower government debt more markedly. Fiscal outcomes will have to be strengthened by containing the wage bill and streamlining social and healthcare coverage, spending by local governments and tax expenditures, while taking into account short-term economic conditions when defining the pace of

adjustment. Fiscal consolidation focused on spending restraint will create space to raise investment in education, digitalisation and other measures to boost potential growth and finance the green transition. The effectiveness of the fiscal framework would be strengthened by making public finance programming laws binding and fully implementing expenditure reviews.

Pursuing structural reforms will boost productivity

Potential growth and productivity have decelerated over recent years. The employment rate has continued to increase but remains below the OECD average.

Lifting productivity growth hinges on a wider diffusion of digital technologies, continued reductions of still high regulatory barriers and stronger innovation. Easing barriers to entry and regulations in some services sectors would support competition. France has a dynamic innovation ecosystem that should continue to be supported.

Figure 2. Productivity growth has slowed

Annual average growth in GDP per hours worked

Source: OECD Productivity indicators (database).

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The past few years have seen ambitious policy efforts to boost competitiveness and employment. This includes cutting business taxes and reducing social charges on low salaries, along with reforms to unemployment benefits, apprenticeships and vocational training. The government is implementing a better-connected and more supportive “network for employment”, which includes stakeholders in employment and integration, coordinated by “France Travail”. The reform is promising, but the task’s complexity and the challenging coordination efforts involved will require careful implementation. Apprenticeships continue to receive strong support, which could be made more effective by better targeting support to young people with low skills who face difficulties transitioning into the labour market on their own. Stepping up the provision of early childcare services should support women’s participation in the labour market.

Greenhouse gas emission reductions will need to accelerate

France reduced greenhouse gas emissions by 25% between 1990 and 2022, and recently implemented consistent medium and long-term environmental planning. Still, reaching the 2030 targets will require stronger policy efforts across several sectors (Figure 3).

Average carbon prices are relatively high but uneven across sectors. France offers substantial implicit fossil fuel subsidies, particularly to the farming and fishery sectors. Accelerating the phase-out of these subsidies and other tax expenditures while aligning prices across sectors would strengthen the effectiveness of carbon pricing.

More effective sectoral policies would help reduce emissions. Transport emissions are still far from 2030 targets. Large-scale support for electric vehicles, combined with measures to enhance public transport and encourage alternative modes of transport such as cycling, will support more rapid progress. Simplifying administrative procedures for low- and middle-income households to obtain public support would accelerate thermal residential renovations.

Figure 3. Emissions need to decline sharply

Greenhouse gas emissions, Mt CO2-e

Note: Excludes land-use, land-use change and forestry (LULUCF), which in France is a net carbon sink and therefore represents negative emissions. Mt CO2-e stands for million tonnes of carbon dioxide equivalent. Emissions for 2022 are an estimate. The 2030 target is a provisiional goal. The SNBC-3 will put forward definitive carbon budgets. Emissions source categories are defined according to the National Air Pollutant and GHG Emissions Inventory System, as defined by the French Ministry in charge of the Ecological Transition and the Cohesion of Territories.

Source: Citepa, Greenhouse gas emissions inventory, Secten data, 2023 edition; authors’ calculations.

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Education outcomes are mid-range but inequitable

Students perform at a level similar to OECD peers although the link between socio-economic background and educational outcomes is particularly strong (Figure 4).

School autonomy is more limited than in many OECD countries. Autonomy can support educational outcomes but requires quality school leadership. Strengthening the role, responsibilities and career paths of school leaders could help, particularly in primary education and for schools facing challenging socio-economic contexts.

France spends around one third more per upper-secondary student than the average OECD country but around 9% less per primary student. Continuing to rebalance the distribution of spending between primary and secondary schools could provide greater support to children in the early years of their education.

Modern teaching practices like cognitive activation are used less often than in many OECD countries. Ensuring that teachers have sufficient knowledge and skills, support, feedback and time would support their use.

Figure 4. Students’ performance is linked to certain characteristics

* Even after accounting for students' socio-economic status.

Source: OECD PISA 2022.

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France is struggling to attract teachers, particularly in specific subjects and geographic areas. The teacher training system is complex and of variable quality. Improving working conditions, and considering to review remuneration, particularly for primary teachers and teachers in the middle of their career, would increase the attractiveness of the teaching profession.

The classification of some disadvantaged schools as “priority education” generates strong threshold effects, which precludes many disadvantaged students from much-needed support. A more progressive resource allocation to disadvantaged students would better align resources to students’ needs.

Young people without tertiary education, particularly those with vocational qualifications, struggle to integrate into the labour market. The reform of vocational secondary schools introduced in 2023 aims to improve this situation by fostering closer ties between employers and schools. Combining school and significant work experience helps to smoothly transition to employment and should continue to be supported. Young people need to be better informed about future job opportunities, in particular those linked to the digital and green transitions. Diversifying the profiles of career advisers and reducing the number of structures in charge can improve career guidance.

Few girls currently pursue scientific careers and boys are underrepresented in humanities, social sciences and care professions. Continuing to combat gender stereotypes through better information would support gender diversity across career paths.

Supporting the well-being of students is essential to create a more conducive learning environment and improve students’ outcomes. France has implemented plans to fight bullying and violence at school, which should continue to be treated as priority issues. Still, student discipline problems are more frequent than across OECD countries, according to the last PISA Survey. Teachers’ training for managing the classroom and student behaviour can be strengthened. Including students with special needs in regular classes has become more common, but additional efforts are needed to meet the substantial needs for hiring and training assistants.

 

Main findings	Key recommendations
Improving the efficiency of public finances
Public debt has increased significantly since the start of the decade. Tax expenditures are considerable and their effectiveness could be improved.	Step-up fiscal consolidation by reducing public spending and tax expenditures and improving their efficiency.
The tax-to-GDP ratio is one of the highest in the OECD. Taxes on labour are particularly high. Some business taxes have distortive effects.	Once public finances are balanced, continue to lower taxes on labour and eliminate distortive business taxes. In the short term, consider a shift in tax bases towards broad-based taxes and environmental taxes.
The Public Finance Programming Acts provide targets that were meant to strengthen the fiscal framework and curb public debt, but their effectiveness has been limited.	Strengthen the effectiveness of recent improvements in the fiscal framework by making the public spending ceilings binding and fully implementing spending reviews.
The 2023 pension reform is expected to increase the working population but older workers face difficulties in the labour market. The reform does not guarantee balanced pension funding. The system remains fragmented between different schemes and regimes, which makes it more difficult to implement fair rules and forecast pension expenditure.	Strengthen policies to support older people in employment. Closely monitor the impact of the pension reform.
Boosting employment and productivity
Tax incentives for private R&D are amongst the highest in the OECD, yet R&D spending is consistently below the OECD average. Tax credits reach SMEs but provide more support to large firms.	Build on dynamic innovation ecosystems and a workforce with strong scientific and technological skills to attract R&D spending from multinationals.
Broad support for apprenticeships has accelerated their use since 2018. Such contracts may be replacing other forms of employment.	Target financial support for apprenticeships to young people with low skills and difficulties to join the labour market on their own.
Although the gap is below the OECD average, the employment rate of women remains below that of men.	Pursue efforts to improve the provision of early childcare services.
Supporting the green transition
Carbon prices are highly uneven across sectors, particularly in agriculture and fishing, reducing their incentives to reduce emissions.	Accelerate the phase-out of fossil fuel subsidies, reduced rates and exemptions on fossil-fuel taxes. Further align carbon prices and tax polluting activities in line with their environmental impacts.
Past declines in transport emissions are insufficient to reach targets. The energy intensity of freight transport is high, with the share transported by rail low. Heavy vehicles continue to benefit from significant tax exemptions for diesel fuel.	Remove tax exemptions on diesel fuel for heavy vehicles to encourage a shift of freight transport from road to rail.
France’s numerous programmes to support and fund residential renovations are complex and the up-front investment can be a significant barrier.	Reduce the barriers to complete renovations by simplifying administrative procedures and making it easier for low and middle-income households to obtain interest-free loans.
Strengthening educational outcomes
Primary schools have limited autonomy, and school leaders are teachers responsible for administrative and pedagogical functions. Secondary schools have partial autonomy in how they manage and implement state budgets. Results from PISA suggest that appropriately combining autonomy and accountability is associated with better student performances.	Continue to raise school autonomy and accountability, particularly in primary schools.
Modern teaching practices promote critical thinking and decision making. They are associated with better student achievement and engagement but are used less widely than in other OECD countries.	Reinforce the use of modern approaches to teaching including cognitive activation practices by ensuring that teachers have sufficient knowledge and skills, support, feedback and time.
The attractiveness of the teaching profession could be improved. Salaries are lower than in alternative professions with similar qualifications, especially in primary schools. Early career increases are slow.	Improve the attractiveness of the teaching profession and consider reviewing remuneration for primary teachers and teachers in the middle of their career.
France provides additional resources to disadvantaged schools in the “priority education” network. This provides a clear structure for greater resources but results in strong threshold effects.	Continue to develop measures to combine the system of priority education networks with a more progressive allocation of resources to disadvantaged students outside of this system.
Significant imbalances between labour supply and demand reflect students’ lack of awareness about future employment opportunities. Disadvantaged students have less access to guidance counselling.	Strengthen the quality of career choice counselling for secondary students, including through a stronger role for professional counsellors and additional efforts targeting disadvantaged students.
France has one of the highest incidences of in-class discipline problems in the OECD.	Strengthen teacher training in classroom management and student behaviour.