France: All the conditions are met for growth to become much lower than potential growth in 2019-2020

The sharp rise in hiring difficulties faced by companies in France suggests that the unemployment rate may be nearing the structural unemployment rate. This means that in 2019-2020, French growth will at best be equal to potential growth. But several factors should (or could) mean that growth will become much lower than potential growth: The need to reduce public spending to meet France’s budget commitments; The end of the corporate investment cycle, amplified by the rise in uncertainty; The absence of mo netary policy leeway in the euro zone to stimulate demand; And probably a further rise in oil prices, eroding wage earners’ purchasing power. It would therefore be unwise to count on growth remain ing decent in France in 2019-2020.