Budget 2024: the High Council of Public Finances much more cautious than the executive

Commenting on an HCFP opinion published on Wednesday, the former Minister of the Economy and European Commissioner judged "a little optimistic" the public deficit forecast which according to the executive would reach 4,4% of GDP in 2024.

On the other hand, he considers "plausible, although with small risks of exceeding", the inflation forecast of +2,6% in 2024, after 4,9% this year.

As for public spending, they "risk turning out to be higher than expected, particularly with regard to the cost of energy devices and health spending", worries the president of the HCFP, also First President of the Court of Auditors .

This independent body attached to the Court of Auditors notes that the consensus of economists (+0,8%) and the organizations it consulted is lower than the government's expectations in terms of growth in 2024. The OECD and the Commission European Union forecast 1,2%, the Banque de France 0,9% and the French Observatory of Economic Conditions (OFCE) 0,8%, he recalls.

“0,5 point difference between the government forecast and the Bank of France forecast is a lot. A lot,” remarked Pierre Moscovici before the Senate Finance Committee.

“If we were on 0,8% growth, that would represent 0,3 points of additional deficit,” he later noted in front of the National Assembly. “It’s not without impact.”

He points out "the significant uncertainties surrounding the analysis of the economic situation, in particular due to the current difficulties in understanding numerous behaviors" such as the high level of the savings rate or the low productivity.

“Certain government hypotheses therefore appear quite fragile,” judged Mr. Moscovici. “I do not use the word ‘insincerity’,” he nevertheless stressed.

The government's growth forecast of 1,4% in 2024 is "responsible and sincere", replied the Minister of the Economy Bruno Le Maire, for whom "we must remain not optimistic but proactive".

“Combination of circumstances”

For Pierre Moscovici, this forecast is "high but not unattainable": "Under a certain number of extremely favorable conditions which would be brought together by a combination of circumstances, why not", he said.

“If it is not unattainable, the fact that it is possibly achievable does not mean that it constitutes a good basis for constructing a finance law,” he said, referring to a “gamble” of the executive.

The High Council judges revenue forecasts for 2024 to be "a little overestimated", according to it driven upwards by the optimism of growth projections and "favorable hypotheses" on the yield of certain taxes such as VAT.

As for spending, "despite the extinction of support measures" for the economy linked to the Covid pandemic and the consequences of the war in Ukraine, he notes that they will progress more in 2024 than recommended by the Union European, the government having decided to invest in the ecological transition, national education, defense or justice.

Pierre Moscovici also warned against predictable “overruns” in spending. The announced cost of the tariff shield for electricity "appears low in view of the prices observed in recent months", he notes.

After falling from 111,8% of GDP in 2022 to 109,7% this year "thanks to unusually strong growth in GDP in value", public debt is expected to remain at this "high" level in 2024. The burden of Interest, moreover, would increase "by almost 10 billion" euros, noted Mr. Moscovici.

“The medium-term sustainability of public finances therefore continues to call for the greatest vigilance,” underlines the HCFP, for which France must return “to debt levels (it) allowing it to have sufficient room for maneuver” to cope “ macroeconomic or financial shocks" and expenses linked to the ecological transition.

“We are not here to discuss alternative scenarios,” remarked Mr. Moscovici. He nevertheless calls for “spending better”.