France : 2002-2003.

178 Pages·2003·1.076 MB·English

by  OECD

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Austria, December 2001 Brazil, June 2001
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Canada, September 2001 Romania, October 2002
Czech Republic, April 2003 Russian Federation, February 2002
Denmark, July 2003 Slovenia, May 1997
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ISSN 0376-6438 ISBN 92-64-01485-3 u
2003 SUBSCRIPTION 10 2003 11 1 P ly
(18 ISSUES) -:HSTCQE=UVY]ZZ: 20
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Volume 2003/11 – July Volume 2003/11 – July
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OECD
ECONOMIC
SURVEYS
2002-2003
France
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION FOR ECONOMIC CO-OPERATION
AND DEVELOPMENT
Pursuant to Article 1 of the Convention signed in Paris on 14th December 1960,
and which came into force on 30th September 1961, the Organisation for Economic
Co-operation and Development (OECD) shall promote policies designed:
– to achieve the highest sustainable economic growth and employment and a
rising standard of living in member countries, while maintaining financial
stability, and thus to contribute to the development of the world economy;
– to contribute to sound economic expansion in member as well as non-member
countries in the process of economic development; and
– to contribute to the expansion of world trade on a multilateral, non-
discriminatory basis in accordance with international obligations.
The original member countries of the OECD are Austria, Belgium, Canada,
Denmark, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the
United Kingdom and the United States. The following countries became members
subsequently through accession at the dates indicated hereafter: Japan
(28th April 1964), Finland (28th January 1969), Australia (7th June 1971),
New Zealand (29th May 1973), Mexico (18th May 1994), theCzech Republic
(21stDecember 1995), Hungary (7th May 1996), Poland (22nd November 1996),
Korea (12th December 1996) and the Slovak Republic (14thDecember2000). The
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Publié également en français.
© OECD 2003
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Table of contents
Assessment and recommendations 9
I. Overview of economic developments and challenges 23
Recent developments 23
The short-term outlook 37
Fiscal policy in2003 and2004 39
The challenge of ageing to long-term fiscal sustainability 40
Improving potential output could improve prospects 42
Action is required soon 47
II. Policies to raise potential output 51
Growth through resource deepening 51
Reforms to improve firm-level performance 74
Some aspects of sustainable development 90
Summary 103
III. Public expenditure management 111
Spending in international comparison 111
The challenges ahead 113
Budgetary processes and arrangements across levels of government 117
Policies to strengthen public expenditure management 130
Summing up 154
Glossary of acronyms 158
Notes 160
Bibliography 166
I. Long-term fiscal simulations 171
II. Chronology of main economic events 173
(cid:127)(cid:127)(cid:127)(cid:127)(cid:127)
Boxes
1. Recent measures affecting taxes 38
2. The government’s proposed pension reform 43
3. Evaluating the employment impact of the 35hours legislation 59
© OECD 2003
4 OECD Economic Surveys: France
4. Proposed measures to support the creation, financing and efficiency
of small and medium enterprises 75
5. The State as entrepreneur 87
6. Policy integration across sustainable development areas 91
7. Fiscal relations between levels of government 119
8. The social security system 126
9. Special social security financing funds 129
10. Incomes of the elderly 138
11. Main difference between public- and private-sector pension schemes 142
12. Decentralisation 152
13. Summary of recommendations 155
Tables
1. Quarterly gross domestic product 25
2. General government accounts 36
3. Fiscal sustainability and structural reform 46
4. Impact of spending reform on fiscal sustainability 48
5. Employment programmes for youth under 26years of age 54
6. Expected change in labour costs for minimum-wage workers 66
7. Early-retirement schemes and older-worker employment 70
8. Legal corporate income tax rates 81
9. Inflation of name brand versus in-house products 83
10. Main indicators: climate change 93
11. Greenhouse gas emissions and sectoral indicators 94
12. Long run marginal costs of power generation 97
13. Overview of progress in structural reform 104
14. Major current government outlays 114
15. Organisation of the public sector in France 118
16. Preparation of the State budget 122
17. Fiscal consolidation in the OECD 131
18. Performance indicators: sustainable retirement income 139
19. Official estimates of pension fund balances 143
Figures
1. Recent economic trends 24
2. Reduced supply-side tensions 26
3. Business sector indicators 28
4. Price developments 29
5. Wages, labour costs and competitiveness 31
6. Employment and unemployment 32
7. Current account balance 33
8. Monetary conditions 34
9. Long-term debt dynamics 41
10. Employment rates 44
11. Trends in youth employment 53
12. Minimum wages 62
13. SMIC, take-home pay, labour and employment 63
14. Harmonising minimum wages and low-wage worker social security reductions 65
15. Older worker employment rates 69
16. Financial incentives of retirement schemes 71
17. Water quality of rivers and streams 100
© OECD 2003
Table of contents 5
18. Nitrates in underground aquifers 101
19. Financial costs of water pollution 102
20. Public expenditure 112
21. General government primary expenditure by economic category 116
22. Expenditure shares by level of government 120
23. Slippage in multiyear targets 133
24. Asymmetric response of expenditures to the economic cycle 134
25. Range of activity of social security schemes 148
© OECD 2003
BASIC STATISTICS OF FRANCE
THE LAND
Area (1000km2), 1998 632.8 Major cities (thousand inhabitants), 1999:
Agricultural area, excl. overseas Paris 2125
departments (1000km2), 1998 300.0 Marseille 798
Lyon 445
THE PEOPLE (2002)
Population (thousands) 61075 Total labour force excl. overseas departments 27048
(thousands)
Number of inhabitants per km2 96 Percentage of employment in:
Average annual increase Agriculture 3.7
(thousands), 1990-2002 254 Industry and construction 23.7
Services 72.7
PRODUCTION (2002)
Gross domestic product atmarket prices Gross value-added by activity at basic
(eurosbillion) 1523 prices (per cent):
Gross domestic product per capita (euros) 24930 Agriculture 3.1
Gross fixed investment as a per cent of Industry 22.2
GDP (current prices) 19.5 Construction 4.3
Services (excl.FISIM) 70.4
GENERAL GOVERNMENT (2002)
ESA95concept, as per cent of GDP:
Current expenditure 54.0
Current revenue 50.5
Gross fixed investment 3.3
FOREIGN TRADE (2002)
Exports of goods and services (% of GDP) 27.0 Imports of goods and services (% of GDP) 24.9
Main exports as a percentage of total Main imports as a percentage of total
exports (SITC): imports (SITC):
Food, beverages and tobacco (0+1) 12.8 Food, beverages and tobacco (0+1) 8.3
Chemical products (5) 15.2 Chemical products (5) 13.3
Manufactured products (6+8+9) 23.9 Manufactured products (6+8+9) 28.8
Machinery and transport equipment (7) 43.8 Machinery and transport equipment (7) 37.6
THE CURRENCY
Monetary unit: euro Currency unit per $, average of daily figures:
Year2002 1.061
April2003 0.9199
This Survey is published on the responsibility of the Economic
and Development Review Committee of the OECD, which is
charged with the examination of the economic situation of member
countries.
The economic situation and policies of France were
reviewed by the Committee on 20May2003. The draft report
was then revised in the light of the discussions and given final
approval as the agreed report of the whole Committee on
26June2003.
The Secretariat’s draft report was prepared for the Committee
by Andrew Burns, Alessandro Goglio and Boris Cournède under
the supervision of Yutaka Imai.
The previous Survey of France was issued in November2001.
Assessment and recommendations
French economic Activity has slowed in the past 18months, following
growth has slowed several years of strong employment and output growth.
Although GDP increased by only 1.2per cent in2002, the
labour market has resisted remarkably well. Employment
has continued to rise and unemployment has edged up only
marginally. Accommodative monetary conditions and a
sharp and largely structural relaxation of fiscal policy likely
reduced the extent of the slowdown. However, the budget-
ary easing caused the general government deficit to reach
3.1per cent of GDP, prompting the European Commission to
initiate its excessive deficit procedure. The slowdown
reflected a significant cutback in investment activity. While
the average growth rate for2003 should be less than 1per
cent, corporate and household balance sheets remain in
good shape, suggesting that, as international uncertainty
dissipates, growth could accelerate, reaching a rhythm of
about 2per cent during the course of2004. Moreover, the
slowdown has turned the output gap negative, greatly
reducing supply side pressures. As a result, a return to
higher growth rates is not expected to generate increasing
inflation in the near term.
Rising pension France faces a daunting task in meeting the fiscal chal-
and health costs lenge posed by the ageing of its population, which is
pose a medium- expected to result in the ratio of people retired to those
term challenge,… employed doubling by2030. As a result, there will be only
one worker to support every retiree. This has obvious impli-
cations for the sustainability of the country’s pay-as-you-go
pension scheme, but will also add further impetus to health-
care costs that are already rising strongly as a share of GDP.
The challenge posed is all the greater because, at the same
time as ageing raises spending pressures, the exit from the
© OECD 2003