France Expected to Miss Budget Deficit Target as Revenues Fall Short
A finance ministry official warns that France is likely to exceed its budget deficit target for 2023, as revenues fail to meet expectations.
According to a finance ministry official, France is expected to surpass its budget deficit target for 2023. The government had originally aimed for a deficit of 4.9 percent of gross domestic product (GDP), but this goal is now considered challenging to achieve due to lower-than-expected revenues.
The national INSEE statistics office is scheduled to release a report on France’s national accounts in March, which will shed more light on the country’s fiscal situation. However, following a downward revision of the economic growth forecast to 1.0 percent from the previous target of 1.4 percent, Finance Minister Bruno Le Maire recently announced plans to implement spending cuts worth 10 billion euros this year. These cuts are motivated by weaker-than-anticipated tax receipts and are intended to help meet the deficit target of 4.4 percent of GDP for this year.
Le Maire also mentioned the possibility of making adjustments to the budget in the summer, taking into account both economic circumstances and the geopolitical situation. The government’s ultimate aim is to reduce the deficit to below 3 percent of GDP by 2027, in line with the requirements of the Stability and Growth Pact, an agreement among European Union (EU) members. It is worth noting that these requirements have been temporarily suspended since 2020 due to the Covid-19 pandemic and the economic impact of Russia’s invasion of Ukraine.
Meanwhile, EU members are currently engaging in discussions about reforms to the deficit and debt rules, in order to introduce more flexibility. This could potentially allow countries like France to navigate their budget deficits more effectively in the future.
Analyst comment
Negative news. France is expected to miss its budget deficit target for 2023 due to lower-than-expected revenues. The government plans spending cuts of 10 billion euros this year to help meet the deficit target of 4.4 percent of GDP. Adjustments may be made to the budget in the summer. EU discussions about reforms to deficit and debt rules could provide more flexibility.
