Bercy now expects modest growth of 1% next year.
Will France be in recession next year? While the international situation continues to deteriorate, some economists, for example those of the British bank Barclays, believe so. The government for its part firmly rejects such pessimism. Bercy has in fact contented itself in its finance bill for 2023 with recording a slight deterioration in its 2023 forecasts compared to last July, with growth reduced from 1.4% to 1% of GDP, and inflation which goes from 3.2% to 4.2%.
“The French economy is resisting at the heart of strong tensions”, assures Bruno Le Maire. And the Minister of the Economy to list among the headwinds “the continuing conflict in Ukraine, the high volatility of energy prices and the economic fragility of our main trading partners: the United States, Germany and China”. To hear the number two of the government, the most difficult for the country promises to be for the first months of 2023, when the temperatures will remain winter and that part of the protection devices against price increases will have been lifted. After this peak period, inflation should decline in the second half, he hopes.
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The deterioration in the economic situation of course complicates the budgetary equation. Especially since Elisabeth Borne will give this Wednesday the details of the extension of the tariff shield on gas and electricity prices in 2023, which will cost the State “several tens of billions of euros”despite the slight increases that will remain the responsibility of individuals and businesses.
The Minister of Public Accounts, Gabriel Attal, nevertheless ensures that the public deficit will be well maintained at 5% of GDP in 2023, at the same level therefore as in 2022. The debt would not change either at 111.2% of GDP after 111.5% in 2022. How can this stability be explained in a deteriorated economic situation? Promised tax cuts will first be postponed. The abolition of the CVAE, a major production tax, which was promised all at once for next year, will be smoothed over two years: 4 billion in 2023 and 4 billion in 2024. The reduction in inheritance tax, a commitment to candidate Macron’s campaign, is also postponed.
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Revenues also promise to be sustained, particularly those from corporation tax which have been revised upwards by 3 billion since the July projections. French companies are indeed holding up well against international headwinds, as evidenced by the morale of the bosses, the high level of order books and the impressive job creations in the second quarter. On the savings side, Bercy plans a reduction in the debt burden on the State from 42.2 billion euros this year to 37.5 billion in 2023, with interest rates for the ten-year Treasury bond close to current levels at 2.5%. The high exposure of French debt to inflation, through indexed bonds, explains this trend.
Pension reform
Finally, Gabriel Attal claims to expect a lot from “work carried out by parliamentarians”, charged by the government with the floor on the subject of savings. Deputies and senators from all sides were thus invited Tuesday afternoon to Bercy for a first meeting intended to prepare the 2023 budget. In parallel, a “task force” chaired by the deputy of Indre-et-Loire, Daniel Labaronne , must “rethink in depth public spending”. Among the avenues mentioned, the very classic hunt for tax and social niches, or the no less recurrent overhaul of the research tax credit for large companies.
After much procrastination, the famous pension reform finally seems relevant again and will also bring its share of savings. “The president has set the course for the implementation of a pension reform for the summer of 2023. This course will be held in the finance laws”, we assure Bercy. It remains to set the terms…
Premiere of the “Dialogues de Bercy”
The Ministers of Economy and Public Accounts, Bruno Le Maire and Gabriel Attal, inaugurated this Tuesday afternoon the first of four working meetings on the 2023 draft budget, scheduled by September 21, with representatives of the parliamentary opposition groups within the framework of the operation baptized the “Dialogues de Bercy”. Today’s session, attended by more than fifty people gathered in the large glazed room on the 7th floor of the ministers’ hall, dealt with the “sharing of the macroeconomic and financial framework for the 2023 outlook”.
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