Paris expects less economic growth next year.
(Photo: REUTERS)
Paris While Germany is concerned about the coming year with recession concerns, France is also expecting economic growth in 2023. However, the government in Paris lowered the growth forecast on Tuesday evening from 1.4 to 1.0 percent. Nevertheless, the country, which is much more indebted than the Federal Republic, wants to achieve its budgetary goals by postponing tax breaks.
According to estimates, the French economy will grow by at least 2.5 percent this year. Finance Minister Bruno Le Maire said a “positive growth outlook” was maintained for 2023, but had to scale back expectations in the current environment.
Specifically, he cited the progress of the conflict in Ukraine, the strong volatility of energy prices and the economic weakness of our key trading partners: the USA, Germany and China as reasons. In these difficult times, the French economy is proving to be comparatively “resilient”, Le Maire said.
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The French government is assuming that inflation will ease slightly over the course of the coming year – but only after the winter months. The inflation rate is forecast to fall to 4.2 percent on average in 2023, compared to an average of 5.3 percent this year.
France: New borrowing should fall significantly
The forecasts form the basis of the budget law for 2023, which Le Maire aims to present by the end of September. The finance minister made it clear that the country felt obliged to reduce the budget deficit and national debt.
As in 2022, the deficit is expected to be an estimated five percent of gross domestic product (GDP) in the coming year. The goal of being below the three percent limit of the EU debt rules by 2027 is to be pursued further. According to the government, public debt in 2023 is expected to remain around the target level of 2022 at 111.2 percent of GDP.
“It is non-negotiable that we put French public finances in order,” Le Maire said. In order not to deviate from the course of budget consolidation, Paris wants to split a promised tax cut for companies into two phases. Instead of relief of around eight billion euros for the economy, there will only be four billion euros in the coming year. The other half is then planned for 2024.
Le Maire also expressed hope that Parliament would support cuts in government spending. The generous aid for the French in the energy crisis, such as capping electricity and energy prices, is to be scaled back. Prime Minister Élisabeth Borne will announce details on Wednesday.
In the National Assembly, President Emmanuel Macron’s center alliance no longer has an absolute majority. In particular, the camp around the left-wing populist party “Indomitable France” is calling for an expansion of state benefits. It is also uncertain whether Macron will be able to implement the pension reform he has promised in the coming year.
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