The International Monetary Fund has lowered its growth projections for France and says the country needs more reforms to improve the economy's competitiveness.

The IMF said in a report released Tuesday that it expects the economy to shrink 0.2 percent this year, down from a previously expected fall of 0.1 percent. It expects it to grow 0.8 percent in 2014. France's economy is currently in recession.

The IMF warned that longstanding problems — including falling productivity and profit margins — are becoming more troubling as France's neighbors make reforms that will boost their competitiveness.

It added that France needs to continue to reduce its deficit but that it should focus on cutting spending. So far, the government has mostly relied on tax increases to close the budget hole.