Inflation: government forecasts considered optimistic, for the High Council of Public Finances

2023-04-26 21:52:21

Is the government being too optimistic? The executive’s inflation forecasts for 2023 and 2024 would be “a little underestimated”, judges the High Council of Public Finances (HCFP) in an opinion delivered on Wednesday on the stability program recently sent by the executive to Brussels .

“Even if inflation measured on a year-on-year basis should start to fall back in the course of 2023, the decline expected by the Government seems rapid, so that inflation forecasts (…) seem a little underestimated “, considers the body responsible for assessing the credibility of the trajectory of public finances. In other words, the labels of food products should not necessarily drop in the coming months.

Lower inflation expected in 2024

The stability program details over several years the trajectory of growth, inflation, debt and deficit envisaged by the French authorities. Presented last week by the Ministers of Finance Bruno Le Maire and Public Accounts Gabriel Attal, the “2023-2027” stability program forecasts annual inflation of 4.9% in 2023 (revised up by 0.7 points compared to to the executive’s previous estimate) and 2.6% in 2024 (-0.4 points).

For the year 2023, “achieving the government’s forecast implies a net slowdown in the monthly increase in consumer prices compared to that observed in recent months”, explains the body in this opinion published on the day of the presentation of the stability program to the Council of Ministers. But “such a significant decline, despite the easing of tensions on commodity prices, seems unlikely,” said the High Council.

A “debt reduction imperative”

The authority expects that the rise in production costs will continue to affect the selling price of food products, and that the price of services will remain supported by “the strong increase in wages”.

While the government has undertaken in the stability program to step up efforts to reduce the public debt and deficit, the HCFP welcomes “better consideration” than in the past of “the debt reduction imperative”. But the achievement of these more ambitious objectives is based on “a favorable growth hypothesis”, immediately qualifies the High Council.