Tuesday, Bruno Le Maire reaffirmed his “total determination” to get the public deficit below 3% in 2027. But for the rating agency Moody’s, this objective is “unlikely”. The latter also estimates the 10 billion additional savings in 2024 insufficient to “put the government back on the planned budgetary trajectory”.
The announcement of a slippage in the deficit to 5.5% of GDP (gross domestic product) in 2023 “makes it improbable” that the government will meet its objective of reducing the deficit to 2.7% of GDP by 2027 , “as provided for in its medium-term budget plan presented in September,” Moody’s wrote in a press release. The American agency, whose schedule provides for an update of the French rating on April 26, specifies that the opinion published Wednesday is not a rating opinion strictly speaking.
A deficit larger than expected
INSEE (National Institute of Statistics and Economic Studies) indicated on Tuesday that the deficit, at 5.5% of GDP in 2023, had exceeded the previous year by 15.8 billion euros and 0.6 percentage points. government forecast, which was 4.9%. Which further complicates the debt reduction objective stated by the French Minister of the Economy.
“The larger-than-expected deficit is almost entirely due to lower-than-expected revenues,” Moody’s adds. This higher deficit “underlines the risks inherent in the government’s medium-term budgetary strategy, which is based on optimistic economic and revenue assumptions, as well as unprecedented reductions in spending,” judges the rating agency.
In addition, Moody’s considers it “unlikely” that the government will meet its target of a deficit of 4.4% this year despite the savings in the 2024 budget and the additional cuts announced. Reducing the deficit by one percentage point in one year, excluding exceptional circumstances linked to Covid, “has only been done once since 2000”, recalls the agency.
Moody’s also expects the level of public debt to rise “slowly” from 2024, exposing the country to interest costs “not seen in more than 20 years”.