France: the strength of the recovery will limit deficit and debt in 2021 and 2022

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10 sept. 2021

PARIS (Reuters) – The gradual recovery in public accounts hollowed out by a year and a half of massive support for a French economy reeling from the COVID-19 pandemic will happen faster than the government had anticipated so far thanks to recovery more vigorous than expected, announced Thursday the Minister of Economy and Finance, Bruno Le Maire.

Bruno Le Maire. – Reuters

In mid-July, the government raised its forecast for gross domestic product (GDP) growth for 2021 to 6%, from 5% previously, while economic activity continued to improve in France in the wake of its recovery in the second quarter, under the effect of the rebound in consumption with the lifting of health restrictions.

The government has maintained this forecast, as well as that of a growth of 4% next year, for the construction of the finance bill (PLF) for 2022, which will be presented on September 22 in the Council of Ministers.
This continued and faster-than-expected recovery of the French economy – which should return to its pre-crisis level at the end of the year rather than at the start of next year – will also allow France to post a debt. and a slightly smaller fiscal deficit than expected this year.

The public deficit is expected to reach the equivalent of 8.4% of GDP this year, while it had so far been expected to be slightly below 9% of GDP, Bruno Le Maire explained to journalists on Thursday. This faster than expected improvement will continue next year, with an expected public deficit of 4.8% of GDP in the PLF for 2022, against a forecast of 5.3% so far.

Therefore, the explosion of public debt should be contained and its historic peak should be limited to 116% and not 118.3% as previously estimated.

After settling at 115.1% last year, it is expected to remain slightly below 116% this year before falling to 114% in 2022, when the government has so far expected to see the expansion of the public debt will continue until 2025-2026.

These various forecasts take into account the financing of the measures of the “Marseille en grand” plan announced last week by Emmanuel Macron but do not include the expenses of the new investment plan that the Head of State is due to present soon nor those of the future. engagement income for young people, the contours of which must also be specified in a few weeks, said a source in Bercy.

On the occasion of the presentation of the economic scenario chosen for the construction of the last PLF of a five-year term that he will have entirely spent in Bercy, Bruno Le Maire, who makes no secret of his desire to see the president represent himself, has defended the record of Emmanuel Macron.

He recalled that, despite the crisis, the Head of State had kept or even exceeded his 2017 campaign commitments to lower the tax burden, with 50 billion euros in tax cuts for households and businesses on the five year term.

(Leigh Thomas report, French version Myriam Rivet, edited by Bertrand Boucey)

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