The High Council of Public Finances (HCFP) judged on Wednesday that the new trajectory for reducing the public deficit proposed by the government, which aims to return below 3% of GDP in 2027, lacked “credibility” and “coherence”. faced with a “worrying” public finance situation.
“Taking into account the surprise deterioration of the 2023 public deficit to 5.5% of GDP instead of the 4.9% initially planned and “lower growth hypotheses”, “the return of the public deficit to below three points of GDP in 2027 would imply a massive structural adjustment between 2023 and 2027 (2.2 points of GDP over four years)", which "would be essentially based on an effort to save on spending”, summarizes the HCFP in its opinion.
The new stability program, or “PSTAB”, presented this Wednesday morning to the Council of Ministers, defines for Brussels the way in which France intends to return below 3% of GDP public deficit in 2027, under penalty of financial sanctions . It forecasts a reduction in the deficit to 5.1% in 2024, 4.1% in 2025, 3.6% in 2026 and finally 2.9% in 2027.
An “overvalued” GDP trajectory
“The High Council considers that this forecast lacks credibility”, both because the documentation of this effort “never carried out in the past” remains “at this incomplete stage”, but also because “its realization presupposes the establishment of “rigorous governance, bringing together all the stakeholders concerned (
the State, local authorities and social security
), which is not present today,” explains the opinion.
“This forecast also lacks coherence”, warns the institution: “The implementation of the planned structural adjustment will necessarily weigh, at least in the short term, on economic activity”, so that “the high growth forecasts of the government” appear “not very consistent with the extent of this adjustment”.
For 2024, the HCFP estimates that the government's growth forecast, revised downward in February to 1% compared to 1.4% previously, "remains optimistic", "even if it is not out of reach".
But overall, “the GDP trajectory” retained in government forecasts for the period 2024-2027 “is overestimated”, estimates the HCFP. “There is therefore a significant risk that the government's assessment of potential GDP will subsequently be revised downwards, and therefore that the structural part of the deficit will be revised upwards,” he warns.