The National Institute of Statistics and Economic Studies publishes on Tuesday April 30 a first estimate of growth in the first quarter in France, a figure which will help to judge the credibility of the ambitious government forecast.
In its latest economic report published in mid-March, INSEE revised its forecasts downwards, now estimating that gross domestic product (GDP) should stagnate for the period from January to March, the period which weighs the most in the calculation of annual growth.
More optimistic, the Banque de France expects an increase of 0,2%.
However, every tenth of a percentage point will count towards reaching the target of 1% annual increase in GDP set by the government, a forecast higher than that of the main economic institutes.
While the executive has placed growth and control of spending at the heart of its strategy to restore ailing public finances, a zero or low figure in the first quarter would considerably complicate the equation.
“When you start lower, then you have to pedal quickly enough to catch up,” comments Stéphane Colliac, economist at BNP Paribas, for AFP.
The macroeconomic data from the start of the year hardly encourages optimism, particularly sluggish household consumption.
INSEE must also reveal on Tuesday how the latter evolved in March, as well as inflation figures for April which affects households' appetite for consumer goods.
With this mixed first quarter, "we think that (the government's forecast) is not at all realistic," says OFCE economist Magali Dauvin, who is instead counting on 0,5% annual growth. .
Budget cuts
The context is delicate for the government, with the deficit slipping in 2023, to 5,5% of GDP compared to 4,9% expected, mainly due to poor revenue.
The executive, however, maintained its ambition to bring it below the threshold of 3% of GDP in 2027, in line with European standards. “Other countries in Europe have done it, I don’t see why France would not be capable of doing it,” launched the Minister of Economy and Finance, Bruno Le Maire, on Monday to the deputies.
If they maintain for the moment their high ratings on France's capacity to repay its debt, the rating agencies Moody's and Fitch do not believe it.
No more than the first president of the Court of Auditors, Pierre Moscovici, who estimated Monday on franceinfo that the deficit reduction trajectory "as it was presented (...) lacked credibility and coherence".
The executive has already made 10 billion euros in savings in state spending and is seeking 10 billion additional cuts to be made in 2024, to achieve its new public deficit objective (5,1% of GDP, compared to 4,4% initially hoped for).
However, the first 10 billion in savings should already reduce annual growth by 0,2 points, the OFCE warned at the beginning of April.
“If we want to get remotely close to the government's figure (1% growth in 2024, editor's note), we really need a boost in domestic demand, which would come through household consumption,” says Magali Dauvin.
The continued decline in inflation would be likely to restart the machine, like the rate cut by the European Central Bank (ECB), which could take place at the beginning of June and benefit investments.
