Growth reduced to 0,5%: the government is urging Parliament to adopt the 2027 budget

After successively lowering its growth forecast from 1% to 0,9% in April, then to 0,7% in July, the government is now forecasting GDP growth limited to 0,5% in 2026.

This third revision comes the day after the publication of the economic outlook report by the National Institute of Statistics and Economic Studies (Insee). Even more pessimistic, the institute forecasts annual growth of 0,4% and notes a decline in the French economy compared to several of its European neighbors.

Growth forecast halved

"In total, we have therefore halved our growth estimates for this year," noted Roland Lescure at a press conference. For the Minister of the Economy and Finance, this decline is "significant" and "major."

The government attributes this slowdown to several factors. Heat waves and their effects on agricultural production are estimated to have reduced annual growth by 0,1 percentage point. The closure of the Strait of Hormuz is estimated to have reduced growth by approximately 0,2 percentage points, impacting both household consumption and business spending.

Roland Lescure also mentions the political uncertainties that affected activity at the beginning of the year, as well as the rapid rise in interest rates. This latter point increases the cost of financing the economy, while directly raising the cost of public debt.

A rebound to 1% is expected in 2027

For 2027, the government is using a growth assumption of 1%. This forecast is based in particular on a gradual reduction of geopolitical uncertainties and remains, according to the minister, surrounded by "significant uncertainties".

Its level will depend in particular on the evolution of international conflicts, energy prices, interest rates, and climate events. The government is also forecasting inflation of 2,1% in 2026, then 1,8% the following year.

This scenario constitutes the macroeconomic framework adopted for constructing the draft budget law for 2027. But lower than expected growth mechanically reduces tax revenues and limits the room for maneuver available to support investment and activity.

The 5% deficit target for 2026 has been abandoned.

Given the current situation, the objective of reducing the public deficit to 5% of GDP by 2026 "is no longer an option," acknowledged Roland Lescure. Having reached 5,1% in 2025, the French deficit will therefore exceed 5% again this year. The government has not yet released a new, precise estimate.

Eric Coquerel, chairman of the National Assembly's Finance Committee, believes that the deficit could reach between 5,3% and 5,4% of GDP, or even exceed this range.

The rise in rates also increases the debt burden, expected to reach 65 billion euros in 2026. According to the minister, this amount includes an increase of 4,5 billion euros related to the crisis compared to initial forecasts.

A 2027 budget presented as urgent

Roland Lescure presented these new forecasts as "Act 1 of the budgetary sequence." The draft budget for 2027 is to be unveiled on September 30, before its examination by Parliament starting in October.

“We are in a constrained budgetary framework. To put it simply, we have no more fat,” the minister said, calling for the adoption of a budget “as soon as possible for 2027, before the end of the year.”

The government is seeking further savings and is considering, in particular, a smaller increase in certain pensions. The Minister for Public Accounts, David Amiel, indicated that any indexation of pensions to inflation should be financed proportionally by a reduction, or even the elimination, of the 10% tax allowance applied to pensions and annuities.

The government is also considering reducing the exceptional surtax on the profits of large companies. It also states its intention to preserve apprenticeships, the research tax credit, and the Dutreil pact, so as not to penalize investment and business transfers.

These are decisions that construction companies are waiting for.

For professionals in the building and public works sector, the precise content of the budget will be crucial. The level of public investment, apprenticeship support schemes, energy renovation grants, and business taxation directly influence order books and hiring decisions.

Roland Lescure asserts that the 2027 budget "will require a shared effort, but an effort that must preserve our growth engines." Éric Coquerel, on the other hand, criticizes budget cuts he considers recessionary and calls for seeking more revenue from wealthier taxpayers and large corporations.