France hopes for 'ambitious' growth in budget plan

The French government on Wednesday presented a budget plan based on a buoyant growth prediction that raised eyebrows at France's public finance watchdog.

Submitting his 2024 budget plan to President Emmanuel Macron's cabinet, Finance Minister Bruno Le Maire put gross domestic product growth at 1.4 percent for next year, which compares to a 0.8 percent consensus among leading forecasters, and 0.9 percent from the country's central bank.

Pierre Moscovici, a former finance minister and now head of the independent HCFP watchdog that checks the realism of government predictions, called the forecast gap "big, very big" during a senate hearing.

The government was "taking a gamble" with its growth outlook, he said.

But Le Maire stood by his estimate, saying it was "responsible and sincere".

"We must be ambitious, if not optimistic," he added.

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Economic growth is the base for a host of other indicator estimates, including the public- sector deficit.

Because of the doubts on growth, "some of the government's forecasts appear quite fragile", Moscovici said.

Le Maire said the budget's overall themes were the fight against inflation and investment in the transition to a decarbonised economy, but acknowledged that, like many countries, France was still overcoming financial burdens brought on by the Covid pandemic and rising energy prices.

France still hopes to cut spending by around 16 billion euros ($16.9 billion) next year -- essentially by phasing out electricity price subsidies for households and companies -- and raise new revenues, including from a new motorway levy.

France still has one of the eurozone's deepest public-sector deficits, at 4.9 percent of GDP, and is targeting 4.4 percent next year, an objective the HCFP called "optimistic".

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Only in 2027 does France hope to bring the deficit back below the three percent deficit ceiling for eurozone members, to 2.7 percent, Le Maire said.

Accumulated public-sector debt -- which eurozone rules cap at 60 percent of GDP -- is currently at 109.7 percent, and will fall only slightly in 2024, to 108.1 percent, according to the government, as pump price subsidies for low-income drivers are renewed.

According to government figures, debt servicing could rival education as France's biggest single budgetary expenditure next year.

The budget draft is likely to face a rough welcome in parliament, where President Emmanuel Macron's centrist party lost an absolute majority last year.

As a result, the government may again resort to a controversial constitutional move -- Article 49.3 -- to bypass a vote and pass the legislation, as it did earlier this year to push through unpopular pension reforms that sparked violent protests.

Source: AFP