The French government is being urged by the International Monetary Fund (IMF) to take more drastic budgetary measures to reduce the deficit, which is estimated to be 5.3% of the GDP in 2024 and is projected to only decrease modestly in the coming years, reaching 4.5% in 2027. This is far from the projections of the French Ministry of Finance, which forecasts a return of the deficit below the 3% threshold of GDP by 2027. The IMF highlights the need for key measures to reduce spending to be identified in order to achieve the necessary adjustments.
The IMF’s scenario is based on less optimistic macroeconomic assumptions compared to those of the French government. The institution predicts a growth rate of 0.8% in 2024 for France, while the Ministry of Finance forecasts 1%. In 2025, the IMF projects a growth rate of 1.3% compared to Paris’s estimate of 1.4%. In terms of inflation, the IMF expects rates of 2.3% and 1.8% for 2024 and 2025, respectively. These conclusions are drawn from a report issued on May 23 as part of the IMF’s monitoring of member states’ exchange rate policies.
The publication of the report comes after the High Council of Public Finances (HCFP) criticized the lack of credibility and coherence in the French government’s deficit reduction scenarios up to 2027. The IMF emphasizes the need for the government to increase budget discipline this year by identifying specific and credible areas for savings. Additional measures amounting to around 0.4% of the GDP will be necessary to reduce the deficit to 4.9% by 2024, according to the IMF’s recommendations.
During the presentation of the report, Manuela Goretti, head of the IMF mission for France, mentioned that the measures announced in the stability pact in April, representing approximately 0.3% of the GDP, are not significant enough to address the deficit reduction requirements for 2024. This points to the need for additional measures to be implemented to reach the IMF’s targets. French Finance Minister Bruno Le Maire reacted strongly to the IMF’s recommendations, emphasizing the importance of the government’s commitment to sound budgetary policies to address the deficit challenges.
Overall, the IMF’s assessment highlights the urgency for France to step up its efforts in reducing the budget deficit and implementing effective measures to improve the country’s economic outlook. With differing projections between the government and the IMF regarding growth and inflation rates, it is crucial for France to align its fiscal policies with the recommendations of international financial institutions to ensure sustainable economic development and financial stability in the long term.
