Growth, deficit: Bercy’s plans already criticized by budgetary sages

Posted Sep 26, 2022, 6:00 AM

Before its official presentation on Monday , Gabriel Attal had assured the “Journal du dimanche” that the government’s 2023 budget would be that of “the protection of public accounts” and an “essential step for the recovery” of public finances. The least that can be said is that this opinion is not completely shared by budget wise people.

Thus, Bercy’s deficit forecast of 5% of GDP for next year – yet considered unambitious even within the majority – is “a little underestimated” and testifies to a “recovery of public finances which is ‘slow and very uncertain announcement in 2023’, according to the two opinions issued by the High Council of Public Finances (HCFP), of which “Les Echos” obtained a copy.

Growth considered too optimistic

This independent institution, attached to the Court of Auditors, examined both the finance bill (PLF) for 2023, the social security finance bill (PLFSS), but also the Public Finances (LPFP) which covers the entire five-year period up to 2027. The positive points that emerge from this review are relatively rare. For 2022, the HCFP judges that the deficit forecast is “somewhat cautious”, so that the balance could be better than the -5% of GDP expected. But it is to immediately add that this figure “remains particularly degraded in 2022, despite growth in volume which remains solid”.

The remarks of the budgetary wise men are even more critical for the exercise which is about to begin. Bercy finally determined to reduce its growth forecast to 1% for 2023 but this figure is still considered “a bit high due to several fragile assumptions”, and this in view of the consensus of economists.

These coming clouds over activity are not the only ones scrutinized by the HCFP. This calculates that the increase in volume (excluding inflation) of public expenditure is 0.7%, once the impact of the exceptional expenses incurred in the face of the crisis has been neutralized. This is a little more than the figure put forward by the executive, and above all it could be even higher since “some expenses could be underestimated”. Especially since we must remember “the dependence of the cost of tariff shields on electricity and gas on market energy prices”.

Inflection too late on the debt

Under these conditions, the budgetary sages judge that beyond “the great uncertainty surrounding macroeconomic developments and in particular energy prices”, the public deficit expected in 2023 (at 5% of GDP, according to Bercy) ” could be more degraded than expected”. “All in all, although based on optimistic assumptions, the government forecasts for 2023 a simple stability of the effective public deficit and a quasi-stability of the debt ratio. The recovery of public finances thus promises to be slow and very uncertain in 2023”, it is written.

The five-year budget strategy is also judged rather negatively. Reviews had already been issued this summer when the executive had sent its stability program to Brussels , and obviously this one did not really take it into account in the eyes of the HCFP. “The trajectory of public finances presented by the government is not very ambitious, particularly with regard to France’s European commitments”, is it written in the opinion attached to the LPFP. The document also points to the fact that “the intended inflection of the debt trajectory is limited and late, even though the growth assumptions are optimistic”.

This opinion is all the more critical in that the government’s promises to control public spending after 2024 are deemed to lack credibility – “ambitious”, according to the diplomatic terms of the opinion. Bercy, for example, promises a decline of 0.7% on average between 2023 and 2027 in state spending, according to the census of budgetary sages. But “this trajectory will be all the more difficult to achieve as the credits included in the sectoral programming laws (defense, interior, research) will stiffen State spending over the period, assuming a very marked reduction in the spending of all the other ‘non-priority’ ministries”, he is reminded.

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