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90 Pages·1982·6.239 MB·English
by  OECD
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OECD ECONOMIC SURVEYS 1981-1982 3 D B .1 3 ) 3 i 7 ) D 3 ? 3 D 3 3 D 3 D 3 J 3 3 D = 3 ? 3 J] .1 7 ) 3 3 .1 D D D1711DP3ID7 FRANCE D 11 B rj ) 3 .V7 ] 3 3 3 3 3 3 D ? 1 T] i 7 ] 3 3 17 3 1 3 17 1 I 3 ? ? 1 3 1 3 7 J E 3 3 D LI ) D 3 1 3 JANUARY 1982 ©tie® \a OECD ECONOMIC SURVEYS .;, 7- H C E Î . -mi r.-n FRANCE JANUARY 1982 ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT The Organisation for Economic Co-operation and Development (OECD) was set up under a Convention signed in Paris on 14th December I960, which provides that the OECD shall promote policies designed: to achieve the highest sustainableeconomicgrowth and employ¬ ment and a rising standard ofliving in Member countries, while maintainingfinancialstability,andthustocontributetothedeve¬ lopment of the world economy; tocontributeto soundeconomicexpansion inMemberaswell as non-member countries in the process ofeconomic development; to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordance with international obligations. The Members ofOECD arc Australia, Austria. Belgium. Canada. Denmark, Finland, France, the Federal Republic ofGermany. Greece. Iceland, Ireland, Italy.Japan, Luxembourg, the Netherlands, NewZea¬ land. Norway,Portugal,Spain,Sweden.Switzerland.Turkey, theUnited Kingdom and the United States. TheSocialist Federal Republic ofYugoslavia is associated in certain work oftheOECD,particularlythatofthe Economic and Development Review Committee. OOECD. 1082 Application for permission to reproduce or translate all or pari ofthis publicaiion should be made to: Directorof Information. OECD 2. rue André-Pascal. 75775 PARIS CEDEX 16. France. CONTENTS Introduction I. Domestic trends 8 Demand and output 8 Labour market 15 Prices and incomes 18 Wage rigidity as a factor of inflation 22 II. External transactions 25 Current balance 25 Capital movements 29 Exchange rates 30 Medium-term trend of competitiveness 32 III. Economic policy 38 Monetary policy 38 Fiscal policy and public finance 45 Other economic policy measures 51 New medium-term strategies 55 IV. Short-term forecasts and economic policy conclusions 58 Short-term forecasts 58 Main uncertainties 61 Economic policy conclusions 64 Annex: Chronology of main economic policy measures, 1980-1981 68 Statistical annex 77 TABLES Text 1. Demand and output 9 2. Households' appropriation account 10 3. Population and employment 15 4. Price trends 19 5. Wage trends 20 6. Comparison of wages and consumer prices in selected OECD countries 22 7. Balance of payments on a transactions basis 29 8. Export performance of manufacturing industries 32 9. Foreign trade ratios: major OECD countries compared 33 10. Penetration of the domestic market and export ratios in manufacturing industries 35 11. Monetary policy targets and outturns 39 12. Money and credit 41 13. Central government budget 46 14. Impact of general government transactions on demand 49 15. Comparative tax burden in selected OECD countries 50 16. Medium-term trends of public sector transactions 51 17. Secretariat forecasts 59 Statistical annex A. National accounts 78 B. Gross fixed asset formation 79 C. Industrial production 80 D. Employment and labour market 81 E. The money supply and its counterparts 82 F. Foreign trade by area 83 G. Balance of payments of France with the rest of the world, 1972-1980 84 DIAGRAMS 1. Investment by sector 11 2. Investment and financial position of enterprises 12 3. Output indicators 14 4. Labour market indicators 16 5. Real wage gap 21 6. Foreign trade 27 7. Exchange rate of the French franc on some foreign markets 31 8. Relative competitive position 34 9. Trends of markets and exports for selected product categories 36-37 10. Interest rates 40 11. Business forecasts 62 BASIC STATISTICS OF FRANCE THE LAND Area (1000 sq. km.) 351.2 Majorcities(censusof1975),inh.: Agricultural land in use Paris 2290852 (1000 sq. km.), 1979 294.9 Marseille 907854 Lyon 456674 THE PEOPLE Population 1.1.1981 (thousands) 53838 Total labour force (1980, thousands) 23210 No. of inhabitants per sq. km. 97.7 Influx ofmanpower(1980,permanent Totalincreaseinpopulation,1979 foreignworkersexcludingEEC (thousands) 250 nationals) 9444 PRODUCTION Grossdomesticproduct, atmarket Originofthegrossdomesticproduct, prices,in 1980 atmarketprices(1980): (billions of francs) 2754.9 Agriculture 4.5 GDP per head (US$) (1980) 12136 Industry 32.1 Grossfixed investment(1980): Construction 7.3 per cent of GDP 21.6 Services 56.1 per head (US*) 2616 Total 100.0 GENERAL GOVERNMENT (ESNA concepts) Currentexpenditurein 1980 (per cent of GDP) 43.6 Currentrevenuein1980 (per cent of GDP) 44.0 Grossfixedinvestmentin 1980 (per cent of GDP) 2.9 FOREIGN TRADE Exportsofgoodsandservices, Importsofgoodsandservicesasa includingthosetofrancarea,asa percentageofthe GDP,including percentage of the GDP (1980) 21.1 franc area (1980) 23.1 Mainexportsasapercentageoftotal Mainimportsasapercentage oftotal exports (1980)SITC: imports (1980)SITC: Food,beverages andtobacco Food, beverages and tobacco 9.4 (0+1) 15.5 Machinery andtransport Machineryandtransport equipment 21.5 equipment (7) 33.2 Iron and steel products 7.1 Iron and steel products (67+68) 9.0 Chemical products 9.1 Chemical products (5) 12.0 Mineralfuels,lubricants Textile products (65) 3.3 and related materials (3) 26.7 THE CURRENCY Monetaryunit: thefranc Currency unitsperUSdollar, average ofdaily figures: December 1981 5.7155 Year 1981 5.4343 Note: Aninternationalcomparisonofcertainbasicstatisticsisgiven inan annextable. The annual review of France by the OECD Economic and Development Review Committee took place on 11th December 1981. The present survey has been updated subsequently. INTRODUCTION The recovery which got under way at the beginning of 1979 ended in the first quarter of 1980 and real GDP fell during the year that followed. How¬ ever, given the strong carryover, the rate of growth of output averaged 1.3 per cent in 1980. At the same time, there was a further and steep increase in unemployment. Inflation continued to run at a very high rate (13.5 per cent for the rise in consumer prices). Owing both to the effects of the second oil crisis and the deterioration of France's competitive position, the current balance showed a substantial deficit, Frs.31 billion or $7.5 billion. These trends continued in the first half of 1981. Until the elections, apart from a few adjustments and, in particular, some acceleration in public expenditure, economic policy remained restrictive, the main objective being to curb inflation. The stance of economic policy was changed by the new government at the beginning of the second half of 1981, the primary objective now being to reduce unemployment while at the same time containing inflationary behaviour. The Government has taken or announced measures to encourage a recovery of private consumption by raising the lowest incomes and social security benefits and, in a second stage, to stimulate productive investment through tax incentives and by expanding the nationalised sector. In addition, it was decided to take a number of specific measures to support employment, including a reduction in working hours and the creation of jobs in the public sector. Control of inflation is based on temporary measures to freeze or directly control some prices and profit margins and in the longer term on concerted action of social partners to limit the growth of prices and the wage bill. It is also planned to reduce the amount of liquidity in the economy by setting the target for money supply growth at less than that of nominal GDP and to hold the general government borrowing requirement at less than 3 per cent of GDP, which would imply some increase in tax pressure from 1982 onwards. Finally, in October 1981 it was decided to realign the parities within the EMS. Given the shift in economic policy, it is likely that in 1982 and in the first half of 1983 recovery in output, which got under way in second half of 1981, will continue with annual GDP growth running at around 2.5 to 3 per cent. This, and the specific measures aimed at some work-sharing, will probably allow unemployment to stabilize. The rise in prices, on the Secretariat technical exchange rate assumption, will probably be of the order of 13 to 14 per cent year-on-year and the external deficit is likely to remain large, but should not deteriorate further. These forecasts are clouded by many uncertainties some of which are not peculiar to France. However, in a period of a marked change in economic policy, the behaviour of economic agents, and especially the invest¬ ment decisions of businessmen, is of course particularly difficult to predict. Part I of the survey analyses recent trends in domestic activity. Some of these issues are also examined in a medium-term context. Part II deals with external relations and contains an analysis of medium-term trends in competitive¬ ness. Part III analyses economic policy and the shift in stance which has occurred since the change of government. Finally, Part IV presents the short- term forecasts and the main associated uncertainties and formulates some eco¬ nomic policy conclusions. I. DOMESTIC TRENDS Demand and output Between 1976 and 1979 the French economy experienced a generally stable growth of output of about 3.5 per cent per year. The rate of growth of GDP accelerated in the course of 1979, owing to inflationary expectations stemming from the second oil shock and peaked at the beginning of 1980. GDP subse¬ quently stagnated between mid-1980 and mid-1981 as domestic demand declined markedly, with an absolute fall in gross fixed investment and a negative contri¬ bution of stockbuilding. The depressive effect of higher oil prices on domestic incomes in 1980 and the loss of export market shares due in particular to the improved trade performance of the US and Japan was compounded by a non- accomodating policy which strongly emphasised anti-inflationary objectives. A moderate recovery has got under way at the beginning of the summer of 1981, propelled by an acceleration of both household and public consumption reflect¬ ing the expansionary measures taken by the government returned by the June elections and a positive contribution of the foreign balance. Even so, on present Secretariat estimates, GDP growth for the full year should not exceed 0.6 per cent. The growth of private consumption slowed down steadily in the course of 1980 and the first quarter of 1981 in connection with an absolute fall of dispos¬ able income. Thereafter, with disposable income staging a recovery during 1981, the growth of consumption appears to have picked up, and, on present Secretariat estimates, should have accelerated in the second half of the year. These cyclical swings in total consumption reflect sharper ones in purchases of durables which, in addition to changes in income, can be also explained by other factors. Thus the 2 per cent volume fall in spending on durables in 1980, compared with an average annual rate of growth of nearly 7.5 per cent in the 1970s, can be partly attributed to very tight consumer credit conditions1, while the pick up of sales since the second quarter of 1981 is due to the acceleration of disposable income. Swings in households disposable income since the beginning of 1980 have been considerably sharper than those in consumption, but their impact has been attenuated by offsetting movements in the savings rate. Households' real dis¬ posable income declined by 0.7 in 1980, despite a 1.3 per cent gain in real wage compensation2, largely because of the failure of nominal transfers to keep up with the acceleration of inflation, the weak increase in gross operating surplus due to bad harvests, a temporary increase in the rate of social security 1. In 1980, new credits granted to households for the purchase of consumer durables declined by 3 per cent compared with a 11 per cent rise in the prices of these goods. 2. Nominal change of disposable income and compensation of employees deflated by consumer price index. Table 1. Demand and output Percentage changes from previous period at annual rates, volume 1980 1980 1981 Frs. 1980 1981 I II I II billion Private consumption1 1754.1 1.7 1.9 1.6 1.4 1.5 3.3 Public consumption 421.1 2.8 2.7 2.8 3.5 2.0 3.5 Gross fixed investment 593.8 0.8 -2.2 0.6 -2.2 -2.2 -2.4 Public sector, non-residential3 153.2 4.3 -0.4 3.5 2.5 -2.0 0.0 Residential construction 188.7 -3.8 -1.4 -3.9 -8.0 1.9 -1.0 Private non-residential 251.9 2.4 -4.0 0.6 -0.5 -5.2 -5.0 Final domestic demand 2769.0 1.7 1.2 1.6 0.9 0.8 2.1 Change in stockbuilding' 41.7 0.2 -1.7 -0.3 -0.2 -3.1 -0.3 Change in foreign balance1 -55.8 -0.7 1.1 -0.9 -0.9 2.5 0.5 Exports of goods and services4 580.8 3.4 5.0 2.1 -2.1 8.6 5.4 Imports of goods and services" 636.6 6.3 -0.3 6.1 2.0 -3.0 3.0 GDP at market prices 2754.9 1.3 0.6 0.4 -0.2 0.2 2.3 GDP implicit price deflator 11.5 12.1 11.0 12.0 10.9 14.3 Consumer prices 13.5 13.4 14.4 12.8 12.6 15.4 Index of industrial production* -0.4 -3.7 -4.3 -2.2 -8.0 4.0 1. Consumption in Franceof resident andnon-resident householdsand ofprivate administrations. 2. Public administrationsand national enterprises. 3. Changesexpressed asapercentageofGDPintheprevious period. 4. Not includingconsumptionbyforeigntouristsin France. 5. Not includingconsumption by Frenchtouristsabroad. 6. Quarterly index. Sources: 1NSEE, ComptesdelaNation; OECD, Secretariatestimates. contributions and a revision of income tax scales that only partly compensated for fiscal drag. The saving rate declined to 14 per cent compared with 16 in 1979, possibly as households attempted to maintain their standard of living in face of the first fall in real income in about two decades. In 1981 real dis¬ posable income recovered, increasing by about 2 per cent. 2The main contribution should come from the rapid growth of current transfers, already marked in the first half and subsequently boosted by the measures taken by the new government, and the trend in social security contributions since February, following the abolishment of the temporary surtax. On the other hand, owing to the fall in total employment, real compensation should have stagnated in 1981 despite the 5 per cent rise in real terms of minimum wage rates in July. However, unlike previous periods marked by considerable acceleration in income gains, the saving rate may have risen only fractionally in 1981, as growth this year has probably benefitted lower income groups with high spending propen¬ sities3. 3. 1975 1978 1981 Acceleration of percentage change of real disposable income over previous year 1.4 1.8 2.8 Change in saving rate over previous year 1.2 0.9 0.3

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