Growth, deficit: Bercy’s plans already criticized by budget wise men

Posted on September 26, 2022 at 6:00 am

Before his official presentation on Monday, Gabriel Attal had assured the “Sunday Journal” that the Government’s budget for 2023 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 fully shared by budget experts.

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

Growth considered too optimistic

This independent institution, attached to the Court of Accounts, examined both the Finance Bill (PLF) for 2023, the Social Security Finance Bill (PLFSS), as well as the Public Finance Bill (LPFP) covering the entire five-year period to 2027 Positive points emerging from this review are relatively rare. For 2022, the HCFP judges that the deficit forecast is “somewhat cautious”, so the balance could be better than the -5% of GDP expected. But it is to immediately add that this figure “remains particularly downgraded in 2022, despite volume growth that remains solid.”

The comments of the budget wise are even more critical for the year that is about to begin. Bercy ultimately resolved to lower his growth forecast to 1% for 2023, but that figure is still seen as “a bit high due to several fragile assumptions,” and this in view of the consensus of economists.

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

Turning too late on debt

In these conditions, the budget wise judge that beyond “the great uncertainty surrounding the macroeconomic evolution and in particular energy prices”, the public deficit forecast for 2023 (at 5% of GDP, according to Bercy) ” could degrade more than expected. “However, 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 ”, he writes.

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

This opinion is all the more critical since the government’s promises to control public spending after 2024 are considered unbelievable, “ambitious”, according to the diplomatic terms of the opinion. Bercy, for example, promises a 0.7% drop on average between 2023 and 2027 in state spending, according to the census of budget wise men. But “this trajectory will be all the more difficult to achieve as the credits included in the sector programming laws (defense, interior, research) will tighten State spending in the period, assuming a very marked reduction in the spending of all the other ‘non- priority ‘ministries’”, he recalls.

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