A strong and timely policy response helped cushion the impact of the
COVID19 pandemic and the energy crisis resulting from Russia’s war in Ukraine. Despite
a recovery slowdown in 2023, the French economy has remained relatively resilient in
the face of financial tightening and weaker euro area external demand. Nevertheless, the
crisis response and slower-than-expected recovery have weighed on public finances,
with a sizable fiscal underperformance in 2023 reducing fiscal space at a time of rising
investment needs for the green and digital transformation. While financial conditions
started improving in early 2024, market pressures on sovereign spreads and stock
markets rose in early June following the European elections amid political uncertainty.
Labor market performance has remained robust, although labor productivity remains
below its pre-COVID trend. Against this backdrop, the French authorities have
appropriately shifted their focus towards rebuilding buffers and achieving a sustainable
modernization of the economy. The reforms of the pension and unemployment benefit
systems have already started to yield results. Parliamentary elections are scheduled for
June 30 and July 7. The Staff Report was completed on June 17.