Freeze of electricity and gas prices, distribution of energy vouchers, discounts on fuel prices, support for businesses… For a little over a year, France has increased spending and disbursed billions to help consumers to cope with soaring prices, much to the chagrin of the international monetary fund. This Monday, November 21, the institution published a report recommending that France begin next year to clean up its finances. “It’s time to stop ‘whatever it takes’,” said Jeffrey Franks, IMF mission chief for France, at a press conference. “We supported it no matter what, but it’s time” to put an end to it, he added. According to the IMF’s assessment, the country’s expenditure over the past year is estimated at more than 2% of its GDP.
The government’s initiatives have made it possible to contain the inflation rate “two to three points” below the level it would have reached without aid measures, welcomed Jeffrey Franks. But these exceptional expenditures also weighed on public finances already very degraded by the Covid-19 pandemic, during which the government notably financed partial unemployment and the closures of businesses. It is now “justified to start fiscal consolidation in 2023”, writes the IMF in its conclusions of an economic assessment mission of France, known as “article IV”. However, this is not the path that Paris is taking, notes the institution, noting that “the 2023 finance law does not target a reduction in the deficit, postponing the budgetary adjustment to 2024”. The government is counting on a public deficit of 5% next year, after 4.9% this year, and plans to return below the 3% mark in 2027, where its big neighbors are betting on a faster return to this level. .
In a reaction sent to Agence France Presse, the Minister of the Economy Bruno Le Maire wanted to respond to the international institution. “France has the lowest level of inflation in Europe thanks to the tariff shield,” he said. In its document, the IMF still expects growth of 0.7% next year in France. This estimate “confirms”, for Bruno Le Maire, “the resistance of the French economy”. “This is very good news,” added Gabriel Attal, the Minister of Public Accounts. According to him, the IMF maintains its growth forecast “because it knows that we have the determination to continue to act for our economy”.
The IMF also says it fears “a slight widening of the deficit” in 2023, citing the extension of energy measures and the continuation of the abolition of production taxes for companies. However, targeting energy aid could “largely” allow a budgetary tightening of a quarter of a point of GDP, calculates the international institution, also citing a possible postponement of production tax cuts.
In the longer term, the French deficit should remain above the level at which it stabilizes the debt, anticipates the IMF. The latter fears a widening of the “already significant” gap with comparable European countries. It calls for “a sustained adjustment” to reduce the deficit to 0.4% of GDP by 2030, based on the reduction in the growth of current expenditure, in particular those linked to the pandemic and the energy crisis. Other avenues for reducing public spending and ultimately the deficit, according to Jeffrey Franks: pension and unemployment insurance reforms, as well as the reduction of tax loopholes. “We will implement” the first two reforms, hammered Le Maire, while the Minister of Labor Olivier Dussopt presented this Monday to the social partners the new rules for calculating unemployment benefits.
