French fiscal plans lack ambition – watchdog

France’s long-term plans to cut debt and deficit are built on optimistic economic assumptions and lack ambition when compared to other EU countries, the country’s fiscal watchdog said on Monday.

In preparation for the 2024 budget bill to be presented on Wednesday, the government cut its 2024 growth forecast to 1.4% from 1.6% earlier this month, but otherwise largely left its long-term budget planning forecasts unchanged.

After reviewing the updated forecasts, the High Council for Public Finances said the 1.35% average growth expected by the government over the 2023-2027 period was optimistic.

It added that the government’s 2024 forecast of 1.4% was above economists’ average estimate of 0.8%, mainly because the government assumed that most of the impact from higher interest rates had already been absorbed by the economy.

The council said the government’s updated deficit forecasts did not reflect an increase in debt servicing costs while it had left its tax receipt estimates untouched.

France has laid out one of the slowest tracks in the European Union for reducing its public sector budget deficit to the bloc’s 3% gross domestic product ceiling.

President Emmanuel Macron’s government expects the fiscal shortfall to fall from 4.9% of GDP this year to 4.4% in 2024 before only gradually dropping to 2.7% in 2027 at the end of Macron’s five-year mandate.

While the government has accelerated its debt-reduction plans, the council warned that it was not enough compared to other EU countries.
Source: Reuters (Reporting by Leigh Thomas; Editing by Anil D’Silva)