The International Monetary Fund releases a yearly forecast for countries that will predict the growth of the country. For France and China, the IMF has recently lowered their growth forecast due to a number of different reasons. For France, Paris has lacked a competitive economy and been slow to reform in recent times. For China, credit has been rising too fast along with the debt, and also slow growth economically will coincide with a slower growth in China. These two countries will have to find new ways to generate expansion along with minimizing losses during this slow economic period globally. #
The IMF cited weak profit margins and rigidities in product and labor markets as the major factors holding back growth in France. France currently has a high cost of labor and in order to spur growth settlements will need to be reached in order to get businesses and unions on the same page. Paris is being called out for slow reform and an uncompetitive economy, leading to slower growth.
As for China, the IMF had three concerns that led to lowering its growth forecast. The first was that there has been a very large amount of credit going to the less relevant parts of China’s financial system. The rapid growth raises concerns about the quality of investments and the repayment process. The IMF also estimated that China’s public debt is fifty percent of their GDP, which has more than doubled the year-end 2012 estimate. Finally, the slow global economy will lead to a slower Chinese economy since they are such a major factor in the world market. How can China and France rebound from the slow growth they have encountered? What reforms will be made and when?