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GRAPH OF THE MONTH
The International Monetary Fund (IMF) has recently warned that global debt levels are higher today than in the post-great financial crisis era (2008). Debt to GDP levels are at 225%, accounting for 164,000bn USD. The IMF is clearly concerned about a new crisis, and requires governments to take up their responsibility. Global debt levels are 12% higher than they were in 2009, but this level diverges strongly among countries. More than ever, we should distinguish ‘healthy’ countries from the ‘unhealthy’ ones, both in terms of financial and sustainable performance. This is the latest update of the OECD universe with countries which are eligible:
Source: DPAM, April 2018
Major shifts in the ranking
In September 2015, France dropped below the threshold of 50% best ranked OECD member states, according to our proprietary sustainability model. The main reason was that the country had not made enough progress on various sustainability domains in relative terms, i.e. versus the progress made by other member countries, generally its European peers. Hence, France lost 4 points and was relegated by 5 places in the ranking, while Ireland, Iceland and Slovenia made some progress. This partially explains the relegation of France in the ranking. That France was no longer a top-ranked country in terms of sustainability was barely a surprise as the country’s deteriorating score on the five sustainability pillars had been evident for various semesters.
One of the major concerns was the old age dependency ratio, which was among the worst of OECD countries, combined with high unemployment levels, a low share of renewable energy in power generation, subpar air quality or mediocre results on educational matters (the quality of the educational system), but primarily the important difference in the results of pupils with diverging socio-cultural and economic backgrounds.
Since then, France has gained more than 8 points and has climbed 4 places in the ranking. It is among the 50% best-in-class.
The weaknesses of the country basically remain the same, and progress must be monitored. Hence, France remains at the bottom of the ranking in terms of the old age dependency ratio, which has continued to climb in the past ten years. Youth unemployment remains an issue, as 22.3% of working-age young people are unemployed. This figure has slightly decreased in recent years. At its highest point in 2016, it was at 24%, but before the 2008 crisis it stood at 18%.
France has been strongly committed to climate change issues since the 2015 Paris Summit. It is true that the country has made some progress in terms of renewable energy, which represented 6.2% of its primary energy supply and 9.5% in 2016. However, it lags behind the best pupils like Denmark, which generates up to 30% of its primary energy supply from renewable energy.
Hence, France is among the last eligible countries. The main reason is that the country’s major institutions do not score very well on one particular sustainability dimension. Indeed, its score on the five sustainability pillars is rather average. However, some progress has been made over the past three years, while the momentum of other countries has slowed. As a result, France re-enters the eligible investment universe.
However, the Czech Republic is no longer eligible. The country has relegated as a result of weaker relative scores in terms of transparency, education and economics.