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ECONOMY

Five ways France must improve its economy, according to the experts

The French economy isn't growing as quickly as it needs to, which is having an effect on job prospects, living standards and well-being, according to the latest report from the OECD. Here are five ways it suggests France could improve.

Published: 11 April 2019 17:53 CEST
Five ways France must improve its economy, according to the experts
Photo: AFP
The French economy has slowed down, according to the results of the latest study from the global economics organisation, the OECD, which argues that France should focus on long-term strategies to create growth, improve public finances, create more and better jobs and ensure a more inclusive and cohesive society. 
 
Here's a look at five ways it suggests the country could do this. 
 
More reforms 
 
The OECD report pushes France to keep on with its economic reforms despite the “yellow vest” movement which has pushed back against them. 
 
“There is a real need to address the social challenges of long-term unemployment, difficulty in joining the labour market and weak social mobility,” OECD Secretary-General Angel Gurría said.
 
 
France given economy boost as it beats EU budget target for first time in decade
Photo: AFP
 
“The government has undertaken courageous reforms to boost economic activity, increase the disposable income of low-wage earners and put public finance on a firmer footing.”
 
The OECD said that French President Emmanuel Macron's reforms could add 3.2 percent to per capita GDP over the next decade, benefiting mostly middle and lower-middle income households.
 
Even more ambitious reforms in line with OECD recommendations – such as faster spending cuts and raising the retirement age – could lift that figure to more than 5 percent, added the OECD.
 
“Continuing pro-growth reforms, in line with recent measures, is key to further reducing unemployment,” the OECD report said.
 
Flexibility within the labour market
 
One of the things the OECD would like France to achieve with further reforms is flexibility in the labour market. 
 
While the organisation acknowledges that recent reforms in France have promoted a “more flexible labour market”, it says short-term contracts have “rapidly increased” which encourages breaks between employment. 
 
Macron launches second round of labour reforms
Photo: AFP
 
“Containing the use of short-term contracts would require increasing the relative cost of short-term hiring and reforming the unemployment insurance system so that it does not encourage recurrent short-term employment periods and unemployment spells,” said the report. 
 
“Moreover, favouring workers’ mobility would help match job offers and job seekers.”
 

 

Invest in training programmes
 
The report stresses the need for France to improve the quality of public spending which would improve the country's economy and potentially allow for lower tax rates in the future, particularly on labour. 
 
“France should capitalise on this reform agenda and take further measures to improve public spending efficiency, increase high-quality jobs and ensure that the economy of the future works for everyone.”
 
The organisation said that France should be investing in improving the quality of education and reforming training programmes to strengthen the skills of workers and include low-skilled workers in the labour force. 
 
 
French economic growth to 'fall sharply in 2018'
Photo: AFP
 
Improve digital infrastructure
 
France must improve its digital infrastructure which is much further behind countries with the best performing economies, said the OECD. 
 
“The quality of the digital infrastructure could improve significantly. Efficient, reliable, and widely accessible digital infrastructure will be key to reap the full benefits of digitalisation,” said the report. 
 
It went on to say that France should also invest in digital resources to carry out public administration tasks, which would “contribute to increase public spending efficiency”. 
 
 
Invest in transport and energy
 
France needs to make sure its transport and energy investments better tackle environmental challenges, according to the OECD.
 
“The transport sector accounts for a large share of pollution and emission reductions have been slow, while urban pollution remains high in some cities,” said the OECD. “Infrastructure planning needs to better reflect health and environmental costs and be consistent with government’s targets for reducing greenhouse gas emissions.”
 
The OECD also said that better transport systems would help “increase the efficiency of local labour markets.”
 

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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