IMF raises French 2016 growth forecast, demands further reforms

The International Monetary Fund (IMF) on Tuesday said it expected the French economy to grow 1.5 percent this year compared to a previous forecast of 1.1 percent, but estimated the recovery was not significant enough to trim the unemployment rate.

In its annual review of the French economy, IMF noted: "The economy is recovering, but not at a pace that will bring about the needed reduction in France's high level of unemployment and public debt."

It warned that eventual stagnation in the euro area or possible turmoil in financial markets would challenge French government to meet its growth and financial targets.

"Major efforts are still needed to foster job creation and put public finances on a more sustainable footing," IMF said in a statement.

Hailing the government's competition-enhancing structural reforms and labor tax cut, IMF said "more will be needed to remove barriers to job creation."

In this context, it recommended strengthening job search incentives through the unemployment and welfare benefit systems and by further efforts to adapt education and training to the labor market.

Addressing the controversial labor reform that triggered nationwide protests, strikes and blockades of the country's refineries, the IMF called it "a necessary step toward a more dynamic labor market."

Turning to financials, it called on the government to streamline the civil service and extend means-testing of social benefits in order to cut government spending and ease the tax burden.

However, without further efforts to reduce spending and alleviate debt, France would just barely meet the 3 percent of GDP deficit target in 2017, IMF said.

It estimated debt would peak at 98 percent of GDP next year. Enditem