Good news for the French economy: the OECD significantly raised its growth forecast for France in 2024 to 1.1% on Wednesday, September 25, compared to a previous estimate of 0.7% in May, as inflation slows in the eurozone and allows the European Central Bank to lower its rates. The growth forecast of the Paris-based international organization is now on the same level as the figures from INSEE and the Banque de France, whose data were influenced by a revision of French accounting data earlier in the year. This forecast is slightly better than the forecast of the outgoing government, which is counting on 1%.
For the Organisation for Economic Co-operation and Development, the slowdown in inflation in France and the eurozone is allowing the European Central Bank (ECB) to lower its interest rates, which is helping to finance the economy and boost growth on the continent. The Frankfurt institution lowered its rates for the second time in three months in mid-September, and could do so again in December.
According to the OECD, excluding volatile prices, inflation is expected to reach 2.4% this year in 2024 and 1.9% next year, far from the 5.7% recorded in 2023. Although it has revised French growth upwards for 2024, the OECD has nevertheless slightly lowered its forecast for 2025, bringing it to 1.2%, a decline of 0.1 points compared to the previous forecasts.
Increase wealth taxes to control debt
In a report published this Wednesday, the OECD calls, in the face of the increase in public debts across the planet, to increase taxation on wealth among several recommendations, in order to regain room for maneuver in the face of future “shocks”. “Decisive measures are needed to ensure debt sustainability”, urges the Organization, recalling the “significant budgetary difficulties” due to the increase in debt, demographic aging and policies linked to climate change.
Global public debt has soared in recent years, aggravated by the Covid-19 pandemic and the war in Ukraine, to reach a record $97 trillion in 2023, according to a United Nations report published in June, a near doubling since 2010. “Without sustained intervention, the future debt burden will continue to rise significantly and the room for maneuver to respond to future negative shocks will be increasingly limited,” the Paris-based organization continues, estimating that it is “necessary to deploy more efforts to control spending and strengthen revenues.”
On the revenue side, the OECD suggests that states “adopt measures to eliminate distorting tax expenditures and increase revenue from indirect taxes, environmental taxes and wealth taxes in many countries”. Wealth taxation regularly comes up in international debates against a backdrop of very strong growth in the wealth of the richest thanks to a surge in stock prices in recent years. Taxing the richest is notably being considered by US presidential candidate Kamala Harris, or by the new government in France, faced with a slippage in the deficit.
At the end of July, the OECD had hailed a “remarkable achievement” after the commitment of the G20 Finance Ministers in a declaration to cooperate on tax matters to tax the largest fortunes, without however managing to agree on a global tax which was the initial objective of Brazil which is chairing the international forum this year, in the face of the refusal of several States.
Global growth on the rise
In addition to increasing revenues, the OECD, which brings together 38 developed countries, also calls for an emphasis on controlling expenditure. It says that it is necessary to “improve the targeting of benefits and subsidies” and “undertake further pension reforms to take due account of increasing longevity”.
The easing of monetary policy will help to strengthen global growth, which the OECD sees at 3.2% this year, up 0.1 percentage points from its last forecast in May, and at a similar level the following year.
Among the most spectacular changes, the OECD has significantly raised its forecasts for Spain, which is benefiting fully from the recovery in tourism, and the United Kingdom, whose growth rates are now expected this year at 2.8% and 1.1% respectively, i.e. increases of 1 point and 0.7 points. In the midst of the war in Ukraine, the growth forecast for Russia has risen to 3.7% this year (+1.1 points), and that of Brazil to 2.9% (+1 point), while that of the United States has remained unchanged at 2.6%. Conversely, Japan would be the only major developed country to suffer a recession this year (-0.1%), with the OECD sharply revising its forecast downwards. The Eurozone sees the OECD forecast unchanged for 2024 at 0.7% and revised slightly downwards to 1.3% in 2025, affected in particular by German growth expected this year at 0.1%, and 1% next year.