- After a successful first year of long-awaited reforms, French corporates remain indebted and households lack purchasing power. The Government just published their 2019 budget proposal and economic policy objectives are clear: (i) a further reduction of government spending to deliver tax cuts; and (ii) the strengthening of incentives and financing for the private sector. Significant cyclical tailwinds will help keep the reform momentum.
- President Macron's economic policy can be summarized by five building blocks: (i) Trim public spending; (ii) Make social protection more efficient; (iii) Lower the fiscal burden; (iv) Improve the business climate; and (v) Incentivize households to save less and channel more savings to corporate financing. The growth impact of the whole reform agenda is positive (+0.2pp in real GDP growth per year), thanks to increased competitiveness and in spite of lower public spending.
France