The International Monetary Fund (IMF) assured, Thursday May 23, that it anticipated a public deficit for France “significantly higher” than the government’s forecasts in 2027, and called on the executive to put in place “new measures” from 2024 to bring debt back on a downward trajectory.
“New budgetary consolidation measures are recommended in the medium term starting in 2024, in order to bring the debt back on a downward trajectory,” writes the IMF at the conclusion of a mission in France called “article 4”, counting on a public deficit at 4.5% of GDP in 2027 compared to 2.9% for the government forecast, and eight days before the publication by the S&P Global agency of its rating for France.
This difference, according to the international organization, is due to the fact that “the main review and expenditure savings measures underlying the planned adjustment remain to be identified.” For 2024, the IMF is counting on a public deficit of 5.3% of GDP, when the government is banking on 5.1%.
Below the deficit limit set by Brussels
The executive said in April that it was banking on a “realistic and ambitious” objective to come back below the deficit limit set by Brussels, relating in particular to a budgetary effort which represents 20 billion euros in additional savings in 2024 and then another 20 billion in 2025.
Before the IMF, the High Council of Public Finances (HCFP) had already estimated that the forecasts for reducing the deficit by 2027 lacked “credibility” and “coherence”. This IMF analysis comes eight days before the publication by the S&P Global agency of its rating for France, after the status quo of the Moody’s and Fitch agencies at the end of April.
In its conclusions, the IMF adds that the macroeconomic hypotheses put forward by the government “could prove (…) optimistic”, at a time when France is banking on growth of 1% this year, higher than that of the main economic institutes, including the IMF which is counting on 0.8%. Among its savings recommendations, the IMF insists on targeting unemployment benefits and support measures for workers and businesses or reforming tax expenditures.
“In the absence of additional measures, the debt would reach 112% of GDP in 2024 and would increase by around 1.5 percentage points per year in the medium term,” warns the IMF.
This level of debt “exposes the future evolution of public finances to an unexpected increase in financing costs or to a drop in growth which would aggravate budgetary pressures,” he adds.