Bercy also expects growth of 2.5% this year.
Despite growth that will be weaker than expected and spending that will swell to support household purchasing power, the government is counting on better revenues to contain, as expected, the public deficit at 5% of GDP this year. While the government was counting on growth of 4% in 2022 at the end of 2021, the Covid at the start of the year but above all the war in Ukraine and its repercussions, in particular the surge in inflation, came to thwart the ambitions of a continued post-pandemic economic recovery.
In the macroeconomic framework of the draft rectified budget for 2022 that the government sent Tuesday for opinion to the High Council of Public Finances (HCFP), Bercy thus expects growth of 2.5% this year. “This is a particularly reassuring figure in a difficult geopolitical context”however, judged the Minister of the Economy Bruno Le Maire in an interview with Les Echos.
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But after the “whatever the cost” during the health crisis, the unprecedented price increase since the 1980s, expected by Bercy at 5% on average over the whole of the year, forced the government to new expenditure. to support household purchasing power. A purchasing power package must be announced Wednesday in the Council of Ministers, the day after Prime Minister Elisabeth Borne’s general policy speech before an Assembly where the presidential camp has only a relative majority.
Measures estimated at 20 billion euros
The measures already announced (revaluation of pensions and social benefits by 4%, extension of the tariff shield, general increase of 3.5% of public officials, etc.) should cost more than 20 billion euros, even if the government procrastinates to reveal the exact amount of the bill. “More than 25 billion euros in support measures have already been committed (…) since the fall of 2021” and the cost of the new package “will be of the same order of magnitude”still dropped Bruno Le Maire at Les Echos.
Despite this new spending, the government is maintaining its public deficit forecast at 5% of GDP, after 6.5% in 2021, while economists were anticipating a higher figure. The public debt ratio should fall to 112% of GDP at the end of the year, against 112.9% at the end of 2021. The good surprise comes indeed from the receipts, since thanks to better expected tax and social security receipts (VAT, on corporations, income tax, contributions), Bercy is seeing a massive revenue surplus of more than 50 billion euros, and even “55 billion”specifies the Minister of the Budget Gabriel Attal in the same interview with Les Échos.
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A boon when, according to the Mayor, the “alert rating” has been affected for public finances, with the rise in interest rates which is tightening the conditions for government borrowing. “That we review growth downwards, that we maintain the deficit forecast at 5%, it is the sign (…) of the control, that we impose ourselves, of public finances”we thus defend at the Ministry of the Economy.
But this scenario could also fuel the expectations of certain political parties which are calling for more efforts from the State to support households, even if Bercy bluntly refutes in advance the traditional suspicions of “jackpot” that emerge whenever revenue is better than expected. While Elisabeth Borne continues consultations with the parties present in the Assembly to try in particular to obtain a compromise on the purchasing power bill and the amending budget, the executive seems reluctant to increase the bill.
When the RN or the LRs defend a massive drop in fuel taxes, for example, Bruno Le Maire proposed on Tuesday to“consider an extension of the 18 cent rebate until the end of the year (…) rather than embarking on extremely expensive tax measures”. And for those who want to seek new revenue via an exceptional tax on the excess profits of certain companies, such as Total or the carrier CMA CGM, this is not “not necessarily the best solution”replies the Minister.