Rarely have a few tenths of a point been so eagerly awaited, scrutinized, and commented on. France's public deficit for 2023 stood at 5.5% of GDP, or €154 billion, according to data published on Tuesday, March 26, by the national statistics institute INSEE. The figure is much higher than the 4.9% assumption included by the Finance Ministry in the 2024 budget, which was adopted by Parliament at the end of last year. Public debt now stands at 110.6% of GDP.
The government had been laying the ground for bad news for several weeks. In an interview with Le Monde on March 6, Finance Minister Bruno Le Maire said that "due to the loss of tax revenue in 2023" the figure would be "significantly above 4.9%." Speaking on RTL radio on Tuesday, the minister said that tax revenue had decreased by €21 billion in 2023. He pointed to the fact that inflation, which usually boosts tax revenues, had slowed down. "There was not more public spending than we had said, there was less revenue than forecast," he insisted.
The slowdown in growth also prompted the Finance Ministry to revise its macroeconomic forecasts for 2024 in mid-February and to announce a new €10-billion savings package with immediate effect. Forecast at 1.4% in the 2024 budget, GDP growth is now expected at 1% this year. Many economists still consider that number too optimistic. "There was growth [in 2023], it will be there in 2024 and I think that in 2025 and 2026 we will have very dynamic growth," Le Maire said on RTL.
The impact of the economic slowdown on public finances is almost automatic: Budgeters estimate that one point less growth than forecast increases the deficit by 0.5 points of GDP, given that the total rate of tax and social contributions in France is close to 50% of wealth produced. (One point of French GDP is just over €25 billion.) As the 2023 deficit deepens, the government's target for 2024 becomes harder to achieve. For the time being, the Finance Ministry is still counting on the public deficit being brought down to 4.4% this year, as forecast in the 2024 budget.
The pace of the recovery of France's public accounts remains slower than elsewhere in Europe. The country remains under the watchful eye of the rating agencies, which will make public their ratings at the end of April. By then, Paris will have updated its forecasts as part of its stability program, a document sent to the European Commission each year in April, detailing how France intends to bring its deficit below 3% of GDP by 2027. The task has lost its relevance over time, because the budget trajectories are never respected. It will no longer be compulsory from 2025, under the reform of European rules. Nonetheless, in its latest annual report, France's Court of Accounts estimated that the government needs to make savings of €50 billion to return to a deficit below 3% by 2027.
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