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Edition September 28, 2018 - Crédit Agricole S.A.
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  • Edition September 28, 2018

    France – Draft budget for 2019: Public deficit to increase temporarily to 2.8% of GDP in 2019

    On 24 September, the French government presented its draft finance bill for 2019. The public deficit will increase slightly, to 2.8% of GDP in 2019 vs. 2.6% in 2018. The public debt ratio should stabilise at 98.6% of GDP. The slight increase in the deficit is temporary and is due to switching the CICE tax credit into a reduction in contributions. The reduction in levies will amount to around 25 billion euros (net) in 2019, 6 for households and 19 for businesses.

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  • Content:

    - Main outlines of public finance strategy
    - A slightly less favourable economic environment than expected
    - 2018 public deficit revised upwards
    - Public deficit to rise slightly in 2019
    - Principal measures for receipts in 2019
    - Principal spending measures in 2019
    - Stabilisation of the public debt ratio
    - Comment

  • Extract – Impact on household income

    The impact is fairly measured. In 2019, cuts in levies will amount to around 6 billion euros, of which 3.8 billion for the new tranches of council tax exemption, and 0.6 billion for reduced social security contributions on paid overtime. But these measures will only kick in in Q4 2019. We may, however, note some positive calendar effects, and especially the full-year effect of the phased reduction in contributions. These cuts in contributions are largely offset by higher taxes (energy taxes, tobacco) and the deindexation of a significant proportion of social benefits (pensions, family welfare benefits).

    Employment will benefit from the reforms that have been implemented. Conversely, the number of assisted contracts will again be reduced. In addition, the positive effects of the CICE and the Responsibility Pact are gradually fading. Waged employment in the market sector is thus likely to be a little less dynamic in 2019 (with 160,000 job creations) than in 2018 (245,000).

  • Associative topics : Economics | France


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