The public deficit for 2023 in France has been revealed to be 5.5%, which is 0.6 percentage points higher than the 4.9% initially projected by the government. This news was anticipated, as the Minister of Economy, Bruno Le Maire, had hinted in early March that the deficit would exceed the initial estimate due to a loss in tax revenues. The slowdown in economic growth led to revised macroeconomic forecasts for 2024 and prompted the government to announce additional budget cuts of 10 billion euros. Despite the government’s goal of reducing the deficit to 4.4% in 2024, the widening deficit in 2023 poses a challenge to achieving this target.
The impact of the economic slowdown on public finances is significant, with every percentage point decrease in economic growth leading to a 0.5 percentage point increase in the deficit. With a high tax burden in France, the deficit increase puts further strain on government finances. The government’s target of reducing the deficit to 4.4% in 2024 becomes more challenging as the deficit for 2023 widens. The government continues to project a GDP growth rate of 1% for the year, although many economists believe this forecast to be overly optimistic.
France’s pace of fiscal consolidation is slower compared to other European countries, as evidenced by the government’s revised deficit projections. The government is expected to present updated figures in its stability program in April, outlining its plan to bring the deficit below 3% of GDP by 2027. However, these targets have historically been missed, and upcoming reforms in European rules will render them non-mandatory from 2025 onwards. The Court of Auditors estimates that the government needs to achieve 50 billion euros in savings to meet the 3% deficit target by 2027.
The series of budgetary surprises has fueled criticism from opposition parties in France, particularly since the government’s announcement of additional budget cuts in February. Both the right and left-wing parties have accused the government of delaying transparency on the state of public finances, despite clear indications of the budgetary challenges. The government’s handling of the deficit issue has been the subject of scrutiny, as it seeks to navigate the economic challenges posed by the COVID-19 pandemic and its impact on government revenues. The ability to achieve fiscal targets amidst evolving economic conditions remains a key challenge for the French government.
