Will the government manage to keep its public deficit forecast of 5% at the end of 2022?
The Court of Auditors expressed doubts about this reality, this Thursday, pointing to the “many hazards” weighing on this forecast, criticisms also formulated by the High Council of Public Finances which extends them to growth and inflation expectations.
Confirmed in the draft amending budget (PLFR) that the government must present this Thursday afternoon, the target of 5% public deficit "remains marred by multiple uncertainties" linked to "the health and geopolitical situation", judges the Court of Justice. accounts in its annual report on the situation and outlook for public finances.
Beyond the consequences of the war in Ukraine and the evolution of the pandemic on public finances, which are difficult to quantify, the Court is alarmed by the financial impact of the PLFR, rich in new expenditure.
The heavy weight of inflation
The measures drawn by the executive to support purchasing power, to which is added the resilience plan announced in mid-March, "will deteriorate the 2022 deficit compared to the scenario of the LFI (initial finance law", anticipates According to the draft amending budget that the Court cites in its report, public expenditure should swell by nearly 60 billion euros compared to that envisaged in the LFI.
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An additional cost attributable primarily to high inflation (+ 5.8% over one year in June according to INSEE), which should increase the burden of state debt by nearly 18 billion.
“For me, this is undoubtedly the main point of concern”, worried the first president of the Court of Auditors Pierre Moscovici Thursday at a press conference.
“We cannot live under the illusion of free debt,” he added.
Acted in the PLFR, the extension until the end of August of the discount of 15 to 18 cents on the price of a liter of fuel generates additional expenditure of 4.6 billion euros, for a total cost over the year of 7 .6 billion euros.
An expected increase of 57 billion euros
Wage hikes of 3.5% for civil servants are expected to cost the state 2.2 billion, while the bill for aid to large gas and electricity consuming companies is expected to double to 3 billion on the year 2022. Fortunately for the State, revenues should increase almost as much as expenditure, with an expected increase of 57 billion euros compared to the LFI.
On their own, the wage increases granted by companies to cushion inflation should represent “about 8 billion euros in additional revenue in social security contributions, social security contributions and income tax”, specifies the institution of rue Cambon.
But beware, as for the trajectory of public finances as a whole, the uncertainty around revenue forecasts is “very high”.
The government's growth (2.5%) and inflation (5%) forecasts for 2022 are just as shrouded in uncertainty, regretted Thursday the High Council of Public Finances.
In an opinion published in the morning, the independent body responsible for assessing the credibility of budget forecasts doubts in particular the dynamism of consumption, on which the executive is counting to achieve its objective.
Concerning inflation, its slowdown at the end of the year is “not certain”, which means that the government's forecast is probably “a little underestimated”.
With a public debt of 112.5% of GDP and a deficit of 6.4% at the end of 2021, the government's budgetary leeway is limited.
“Growing risks that could threaten its sovereignty”
The Court of Auditors also regrets that "France did not take advantage of dynamic economic activity between 2017 and 2019 to restore its public finances".
And the doubling of the public deficit because of the health crisis has only increased “the stall with the main countries of the euro zone”, she laments.
To place France on a better budgetary trajectory, she once again advocates “sustained efforts” on controlling public spending.
Another pillar of the strategy defended by the Court, “strengthening growth potential” via an investment policy.
With the explosion of the deficit and the debt, the sustainability of public finances "is becoming more than ever a requirement without which the country would be exposed to growing risks that could threaten its sovereignty", concludes the report.
