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What are the growth prospects of the French economy in the long run? Growth potential has French been permanently affected by the crisis, and if so, by what economic mechanisms can she bounce back? These are the questions that this report was commissioned by the Prime Minister, attempts to shed light.

Co-authored by the Center for Strategic and DG Treasury, this report summarizes the exchanges between economists of the administration, banking and academics that took place during the working sessions of the group. It proposes a reflection on the upstream risks and opportunities for the French economy in 2030. Five contrasting scenarios of evolution are proposed to illustrate the possible growth trajectories over time.

• A differential impact of the crisis across economies

The current context of crisis is marked by many uncertainties. Questioning the prospects for long-term growth is double effect of questions about the consequences, potentially sustainable, a crisis which was distinguished by its overall size but does not affect all countries similarly .

In the short term, the impact of the crisis on economies, measured in lost production level has varied across countries. France, which recorded a decline of only 2.6% of its gross domestic product in 2009, against 4.1% in the euro area, was one of the country that has best withstood the crisis. In the long term, the reaction will probably be separate economies and also depend on how the determinants of potential growth have been affected and economic policy choices to be made by governments from the crisis.

The long-term trajectory of the French economy will depend on both its external environment and growth factors that are fundamental workforce and productivity gains.

• The key role of the policy mix to create an environment conducive to investment

In the coming years, strengthening the banking regulator, foreshadowed by the introduction of Basel 3, should weigh up slightly on the cost of capital, while ensuring more stable economies.

Beyond financial regulation, the pace of capital accumulation in France will depend on both the quality of economic policies implemented in the country and in Europe and the trajectory of emerging economies and the United States. Several developments in financing conditions of the economy are possible. An increase in the real cost of capital in a deflationary environment and generalized mistrust would be detrimental to productive investments, R & D and implementation of large projects. Conversely, maintaining a cost of capital at a relatively low could encourage reckless risk taking and misallocation of capital. The risk is that investment is still dynamic but misguided, heedless of the long-term perspectives (financial sustainability, environmental sustainability), which ultimately penalize growth.

The challenge is to find, in every circumstance, a balanced policy mix, to achieve the necessary budgetary adjustments in the crisis while supporting investment efforts in favor of changing growth patterns. This policy mix will also require coordination of economic and fiscal policies within the euro area and beyond, with major developed and emerging economies.

• Sector to seize opportunities

France must face many challenges in the field of innovation and productivity gains. Indeed, the trend of gains in total factor productivity (TFP) seems to influence in recent years and comparative advantages for export are reduced, partly because of a lack of non-price competitiveness of French products. France is no lack of assets, it has a high level academic training, excellent facilities and attracts many international investments, all of which can be harnessed to stimulate innovation and gains productivity. If France wants to maintain a primary place in the global economy, it must increase its productivity gains and operate a reorientation of its productive apparatus.

Many opportunities are emerging sectoral also in crisis and offer the possibility to define the contours of new growth models. Thus, the development of ICT could get a second wind thanks to synergies with the areas of health, education, the fight against climate change, for example. Changes in society, the aging population and the service sector of growing importance in the economy also offer the possibility of developing new sectors and products. Similarly, taking into account - necessary - of the environmental constraint involves costs in the short and medium term but can lead to gains in innovation and in particular promote long-term growth.

• A more dynamic force than our European partners and with integration into the labor market depends on the policies to be carried

Despite its aging population, France has a relatively strong compared demographics including its European partners. Between 2010 and 2030, France should have 500,000 additional assets. Given the current high unemployment rate, labor's contribution to potential growth will also depend on developments on the labor market.

In the short term, the situation on the labor market has deteriorated in many developed countries, with unemployment rates above 9%. These high unemployment rates mask adjustment procedures heterogeneous activity and employment. So, drop in activity comparable adjustment was made rather by the reduction of the workforce in the United States and by the reduction in hours worked in Europe. In France, as in many developed countries, the cyclical increase in unemployment appears to accelerate the structural changes on the labor market linked to a service sector economy continues, a feminization of employment, the growing needs of compatible frames with an increased level of training but also the growing needs of low-skilled jobs in services.

Thus, although the crisis has been accompanied in France by an increase in cyclical unemployment lower than had been feared because of the decline in activity, however it may add a new layer to an unemployment long term already relatively high before the crisis. Policies that can contribute to an eventual return to full employment are required to courtmoyen term.

• Five illustrative scenarios of growth prospects of France in 2030

The outlook for the international environment and the main determinants of growth in France suggest five possible evolution scenarios:

• a scenario Black pessimistic trajectory of the French economy in a context of widespread deflation;
• a scenario Run of the river extension of sluggish recovery trends that are now emerging;
• a scenario unsustainable growth that materialized after a period of relatively strong growth, the losses associated with only a partial consolidation of imbalances that led to the crisis and the failure to take account of environmental constraints;
• a scenario sustained and sustainable growth that points the gains associated with the reorientation of the production in an environmentally conscious perspective;
• scenario growth sustained and sustainable and more efficient labor market shows that the additional earnings associated with the implementation of proactive policies on employment in the scenario of sustained and sustainable growth .

These scenarios result in average growth rate for the period 2010-2030 ranging from 1.6% in scenario Black at 2.3% in the scenario and sustained growth and sustainable labor market more efficient and lead to growth rates of long-term segregated. Job creation vary between 760 000 and 1 900 000 depending on the scenario.

• The report: Amelie Pichon, Clément Schaff.

What are the growth prospects of the French economy in the long run? Vincent Chriqui, Director General of the Centre d'analyse stratégique, answered questions from the web-TV : Labourseetlavie.com

CONTACTS

Centre d'analyse stratégique
Roullé Jean-Michel, Head of Communications
01 42 75 61 37 jean-michel.roulle@strategie.gouv.fr

Treasury Department
Fabienne Bothy-Chesneau, Head of Communication center
01 44 87 14 21 fabienne.bothy-chesneau@dgtresor.gouv.fr