Reforming labour laws is a key focus for France

In its annual review of the country, the IMF said France, which has a 9% unemployment rate, needed further reforms in its rigid labour market.

It said France could grow by 2.2% a year over the next five years.

France was changing more than was commonly thought but "needs to do better," said Alessandro Leipold, of the IMF's European department.

The fund said the biggest hurdle facing France - one of Europe's largest economies - was "to convince the public of the benefits of a much more flexible labour market and of further reforms in services and product markets".

Labour reforms

"Current demographic trends and ongoing structural reforms suggest potential growth could be higher than previously estimated," said the IMF.

The IMF expects France to grow by 2.5% in 2006 and 2.3% in 2007, significantly more than the 1.2% in 2005.

Reducing unemployment has been a key aim of the French President, Jacques Chirac, who has said he aims to cut the jobless rate to 8% next year.

The report comes after recent figures showed France's economy grew by 1.2% during the second quarter of this year - marking its fastest pace in five-and-a-half years.

The increase was helped by growth in business investment and consumer spending.