Solid growth Conjoncture in France - June 2017

Vladimir Passeron - Dorian Roucher - Clément Rousset - Anne-Marie Stoliaroff-Pépin

An analysis of the current situation and short-term outlook of the French economy and France’s international environment, comprising two analysis reports, twenty-one thematic data sheets, and a number of special focuses on topical matters. For this June 2017 issue, the forecasting period runs to Q4.

Charles-Julien Giraud and Benjamin Quévat
Conjoncture in France- June 2017

Why has growth in Italy lost ground to France since 2000?

Charles-Julien Giraud and Benjamin Quévat

Until 2000, the French and Italian economies grew at a very similar pace, both in growth phases and in times of crisis. Since then, the activity differential between the two countries has increased every year, in favour of France. This gap is widening, although France and Italy are still two very similar countries: they share a border and are comparable in size and population. They use the same currency, have a very similar supply and demand structure, they are integrated into the same common market and share the same social model.

The average annual growth differential since 2000 is 1.0 GDP point, and ground has been lost in virtually all branches of activity. Part of this differential stems from the short-term divergence related to the sovereign debt crisis, the impact of which was considerably more powerful and sustained in Italy. Excluding this effect, the difference in potential growth between France and Italy is still 0.8 points per annum.

Several factors combine to account for this gap. The Italian demographic dynamic, with faster population aging and lower fertility, contributes 0.2 points on average across the period.

Some of the gap may also be the result of different ways of taking measurements. Sometimes the methods used by the French and Italian national accountants diverge. This is especially the case in the volume-price split for certain consumption or investment items, whether for capital goods or for services (rents, telephony, software and databases). All in all, about 0.2 GDP points seem to be attributable to these methodological differences.

When adjusted for these measurement differences and for the demographic effect, the growth potential differential should shrink to 0.4 GDP points on average per year, which is nevertheless significant. The complete absence of productivity gains in Italy is very surprising. Indeed, in some branches such as services to businesses, Italian productivity has been in sustained and steady decline since 2000. The arguments put forward in the literature (rate of research and development expenditure, qualification levels of the labour force, institutional organisation, shareholding structure, regional inequalities) do not seem able to account for the scale of the country’s decline, either in time – since 2000 – or space, against all its European neighbours, particularly France.

Conjoncture in France

Paru le :20/06/2017