France's 2024 Public Deficit: Aiming for 5.4% of GDP Amid Uncertainties
The French government strives to meet its public deficit goal of 5.4% of GDP for 2024 following recently published figures showing a deficit of 5.8%.
The French government is attempting to meet its public deficit goal of 5.4% of GDP by the end of 2024, following the release of new figures from the National Institute of Statistics and Economic Studies (INSEE) that indicate a less severe deficit than previously anticipated.
Initially expected to range between 6% and 6.1%, the figure landed at 5.8% of GDP. This modest improvement has led to a degree of optimism within the Ministry of Economy, reflected in statements from Amélie de Montchalin, the Minister for Public Accounts, who credited local authorities for their efforts to control expenditures in the last quarter of 2024.
Despite this slight betterment, the total deficit for 2024 amounts to €179 billion, leaving France among the European Union's countries with the highest deficits.
The national debt has surged to €3,305 billion, representing 113% of GDP. France continues to face significant challenges in adhering to the EU's fiscal rule aimed at maintaining public deficits below 3% of GDP. The government has pledged a pathway to this target by 2029, with 2024 serving as a critical year to reduce the public deficit to 5.4%.
Officials at Bercy, the French Ministry of Economy and Finance, have asserted that they will adhere to this target, deeming it credible despite earlier setbacks.
The cautious optimism from Bercy comes alongside concerns over France's deficit reduction trajectory, which has been slower compared to other heavily indebted European nations.
For instance, Italy has successfully decreased its deficit from 7.2% at the end of 2023 to 3.4% of GDP, employing austerity measures.
French officials at Bercy have committed to a strategy of gradual progress, acknowledging the need to navigate multiple budgetary uncertainties to achieve the 5.4% goal.
A significant factor influencing this trajectory is the defense budget, which President Emmanuel Macron aims to increase to €100 billion annually by 2029, up from the current €60 billion.
This substantial rise poses a dilemma for the budget, as additional cuts to other expenditures will be necessary to accommodate this defense funding increase.
Furthermore, economic growth remains a critical element of the budget's balance.
The anticipated surge in consumption has yet to materialize, and external pressures, such as potential US tariffs on European steel and aluminum, could dampen the economic outlook.
The government’s growth forecast of 0.9% is under scrutiny following the Bank of France’s downward revision to 0.7%, while Fitch Ratings projects an even lower growth rate of 0.6%.
These revised growth expectations pose a potential risk to the fiscal framework established by French officials.
In response to these uncertainties, the Ministry of Finance announced a freeze on €9.1 billion of credits allocated for both the state and social security, a measure intended to curb expenditure should budgetary warning signs become apparent in the coming months.
Initially expected to range between 6% and 6.1%, the figure landed at 5.8% of GDP. This modest improvement has led to a degree of optimism within the Ministry of Economy, reflected in statements from Amélie de Montchalin, the Minister for Public Accounts, who credited local authorities for their efforts to control expenditures in the last quarter of 2024.
Despite this slight betterment, the total deficit for 2024 amounts to €179 billion, leaving France among the European Union's countries with the highest deficits.
The national debt has surged to €3,305 billion, representing 113% of GDP. France continues to face significant challenges in adhering to the EU's fiscal rule aimed at maintaining public deficits below 3% of GDP. The government has pledged a pathway to this target by 2029, with 2024 serving as a critical year to reduce the public deficit to 5.4%.
Officials at Bercy, the French Ministry of Economy and Finance, have asserted that they will adhere to this target, deeming it credible despite earlier setbacks.
The cautious optimism from Bercy comes alongside concerns over France's deficit reduction trajectory, which has been slower compared to other heavily indebted European nations.
For instance, Italy has successfully decreased its deficit from 7.2% at the end of 2023 to 3.4% of GDP, employing austerity measures.
French officials at Bercy have committed to a strategy of gradual progress, acknowledging the need to navigate multiple budgetary uncertainties to achieve the 5.4% goal.
A significant factor influencing this trajectory is the defense budget, which President Emmanuel Macron aims to increase to €100 billion annually by 2029, up from the current €60 billion.
This substantial rise poses a dilemma for the budget, as additional cuts to other expenditures will be necessary to accommodate this defense funding increase.
Furthermore, economic growth remains a critical element of the budget's balance.
The anticipated surge in consumption has yet to materialize, and external pressures, such as potential US tariffs on European steel and aluminum, could dampen the economic outlook.
The government’s growth forecast of 0.9% is under scrutiny following the Bank of France’s downward revision to 0.7%, while Fitch Ratings projects an even lower growth rate of 0.6%.
These revised growth expectations pose a potential risk to the fiscal framework established by French officials.
In response to these uncertainties, the Ministry of Finance announced a freeze on €9.1 billion of credits allocated for both the state and social security, a measure intended to curb expenditure should budgetary warning signs become apparent in the coming months.
