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Edition October 5, 2017 - Crédit Agricole S.A.
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  • Edition October 5, 2017

    France - Draft Budget Law for 2018: Public deficit reduced to 2.6% of GDP

    The public deficit would reach 2.6% of GDP in 2018 (after 2.9% in 2017). The public debt ratio is expected to stabilise at 96.8% of GDP. The support measures include €10bn (net) of tax cuts and the first component of the major public investment plan. They are part of a supply-side policy and aim at a sustainable recovery of investment and employment. Significant savings on expenditures (€15bn) enable both the funding of these measures and the reducing of the deficits.

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  • Content:

    - Key points of the 2018 budget
    - A more favourable economic environment
    - A look back at the 2017 public deficit
    - The 2018 public deficit
    - Growth support measures
    - Cost-saving measures
    - Stabilisation of the public debt ratio
    - Comments

  • Extract:

    In 2018, the tax measures on businesses, amounting to 6 billion euros, plus the CICE and the responsibility pact, will improve margins and cost competitiveness. The increase in public investment will foster innovation, the sectors of the future, and better training for young people and the unemployed. Hence a gradual recovery of quality competitiveness. The lower taxation of capital (overhaul of the ISF and implementation of the flat tax on capital income) should encourage investments in financial assets and strengthen corporate financing.

    Households benefit from cuts to taxes and social contributions, but their total net impact will remain limited. For all households, the reductions of levies (8 billion euros) are offset in part by 4 billion euros in tax increases and, temporarily, by the lag between the increase in CSG and the decrease in social contributions. Market sector employment will continue to grow. In the opposite direction, in terms of social benefits, households will suffer from the announced cost savings (APL, healthcare expenditure, subsidised jobs, etc.). The total effect of fiscal measures on household incomes and consumption is therefore probably very limited.

  • Associative topics : Economics | France


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