France Needs Strong Recovery Before Repairing Finances, IMF Says

Commuters wait on the platform to board an arriving train at Chatelet station in Paris, France, on Monday, Nov. 9, 2020. France's economy will take a smaller hit from the new lockdown to contain the spread of Covid-19 than it did during the tighter restrictions on activity earlier this year, according to the countrys central bank. Photographer: Benjamin Girette/Bloomberg

(Bloomberg) -- France should wait for economic growth to fully recover before embarking on fiscal consolidation to repair public finances stretched by the coronavirus crisis, according to the International Monetary Fund.

The country’s public debt is set to swell to nearly 120% of economic output this year after huge spending support for workers and firms during repeated lockdowns to contain the spread of the disease. Even so, output should return to pre-pandemic levels before debt-cutting measures begin, the IMF said Tuesday.

“If the recovery is quicker, we would like consolidation to start in 2022, but under our current forecasts we would envisage the consolidation beginning perhaps only in 2023,” said Jeffrey Franks, the IMF’s mission chief for France. The IMF forecasts growth of 5.5% this year and 4% in 2022, after an historic 9% slump in 2020.

The Fund repeated its call for France to put forward a plan now to put debt on a firm downward path over the medium term.