Will the government stick to its public deficit forecast of 5% at the end of 2022?
The Court of Auditors pointed out this Thursday the "
many hazards
" weighing on the budgetary trajectory of France, a few hours before the announcement by the executive of a salvo of new expenditure.
Confirmed last week, the 5% public deficit target “
remains marred by multiple uncertainties
” linked to “
the health and geopolitical situation
”, judges the institution 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 draft amending budget that the government will present on Thursday after noon in the Council of Ministers.
Measures to support purchasing power
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 LFI scenario (initial finance law, editor’s note)
“, she anticipates as well.
According to the draft amending budget (PLFR) that the Court quotes in its report, public expenditure should swell by nearly 60 billion euros compared to that envisaged in the LFI.
An additional cost primarily attributable to high inflation (+5.8% over one year in June according to INSEE), which should increase the state debt burden by 17.5 billion.
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 for its part additional expenditure of 4.6 billion euros, for a total cost on the year of 7.6 billion euros.
Read alsoFuels: prices fell again at the end of June
Costs of aid and wage increases
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 are expected to increase almost as much as expenditure, with an expected increase of 57 billion euros compared to the BIA.
On their own, the wage increases granted by companies to preserve the purchasing power of their employees in the face of inflation should represent "
around 8 billion euros in additional revenue in social security contributions, social security contributions and income tax
" , specifies the institution of the rue Cambon.
But beware, as for the trajectory of public finances as a whole, the uncertainty around revenue forecasts is “
very high
”.
Concern over “
rising energy prices, war in Ukraine, significant increase in interest rates
”
The Court questions in particular "
the ability of growth to withstand the succession of shocks that occurred at the start of 2022 (rise in energy prices, war in Ukraine, significant increase in interest rates)
".
And even if the objective of a deficit reduced to 5% of GDP by the end of 2022 were met, such a figure "
should make even more complex the Government's reaffirmed objective of reducing the deficit below 3 points of GDP and putting the debt on a downward trajectory by 2027
”, warns the Court of Auditors.
Read alsoShortages, inflation, energy... the consequences of the war in Ukraine worry SME bosses
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.
The Court 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.
The sustainability of public finances, a requirement
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.