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Edition April 24, 2018 - Crédit Agricole S.A.
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  • Edition April 24, 2018

    France – Stability Programme 2018 : Public deficit narrowing faster than expected

    In mid-April, the French government presented its "Stability Programme" for 2018-2022. The document describes its public finance strategy over that period. The public deficit is narrowing more rapidly than expected. Reduced to 2.6% of GDP in 2017, it is forecast to reach 2.3% in 2018. Following a slight increase in 2019, to 2.4%, due to switching the CICE to a reduction in employer social contributions, it is expected to continue shrinking, with a small surplus forecast for 2022. The public debt ratio is expected to gradually fall.

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  • Content:

    - Main outlines of public finance strategy for 2018-2022
    - A more favourable economic climate
    - Overview of the 2017 public deficit
    - Public deficit cut to 2.3% of GDP in 2018
    - A slightly higher public deficit in 2019
    - The main measures affecting receipts in 2018-2019
    - Principal spending measures in 2018-2019
    - Reduction in the public debt ratio
    - Comment
  • Extract:

    The overall strategy seems desirable. It is necessary to continue reducing deficits and to trigger a process of gradually reducing public debt. It is also necessary for fiscal policy to support the set of structural reforms designed to provide a lasting boost to growth and employment. This involves a reduction in statutory levies and increases in some spending items. The equation is made possible by a steady, significant curbing of public spending. It also seems timely not to ease up on the structural effort if the economic climate turns out to be better than expected and to focus on cutting deficits, which would help to create more room for manoeuvre should the cycle go into a downswing. 

    The projections seem achievable, underpinned by credible growth assumptions. We note, however, that the reduction in the structural deficit is fairly measured, at 1.4 of a point of GDP over five years, or 0.3 of a point of GDP a year. The deficit reduction should be achieved in equal parts by the structural effort and the improved economic climate.

  • Associative topics : Economics | France

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