The Minister of Economy and Finance, Bruno Le Maire, announced on Sunday February 18 a downward revision of France’s growth forecasts for 2024, from 1.4 to 1%. This implies a “immediate effort of 10 billion euros in savings” this year, he added, invited to the 8 p.m. television news on TF1. Mr. Le Maire assured that the executive would release these billions of euros in savings on State spending, committing “like for seven years” not to increase taxes.
This new growth forecast “takes into account the new geopolitical context”explained the Minister of the Economy, evoking at the same time the war in Ukraine, the Middle East, the “very marked economic slowdown in China” And “a recession in 2023 in Germany”. Paris also maintains its objective of lowering the public deficit to 4.4% of gross domestic product (GDP) in 2024.
Before his announcement, Bruno Le Maire reiterated that this objective appeared less and less achievable. “I will have the opportunity to clarify our economic strategy and our public finance strategy with the President of the Republic and the Prime Minister in the coming days”he declared Thursday. “I believe, over the past seven years, that I have demonstrated clarity and firmness on these subjects each time. »
The Organization for Economic Co-operation and Development (OECD) is the latest economic group to have lowered on Monday, to 0.6%, its estimate of growth of France’s GDP for this year. It followed in the footsteps of the International Monetary Fund (IMF), which is now counting on an increase of 1%. The Banque de France forecasts 0.9% while a consensus of economists surveyed by the Bloomberg agency expects 0.7%.
A clear slowdown
In 2023, Bruno Le Maire had thwarted the most pessimistic predictions. Growth had reached 0.9%, according to INSEE, a level very close to its anticipation, i.e. 1%. But this resistance from the second economic power of the euro zone, in a context of still biting inflation and strong geopolitical tensions, masks very divergent developments in GDP: a second quarter in growth (+ 0.7%), the three others stagnating.
The slowdown is obvious. Activity in 2024 is caught up by the increase in interest rates decided to counter inflation, but which weighs on investments by businesses and households. And in Europe, the German neighbor is doing badly. With notably a slowdown in inflation, the main support for economic activity would lie in a – moderate – increase in household purchasing appetite.
INSEE forecasts growth of 0.2% for each of the first two quarters of 2024. With growth overhang estimated at 0.5% at mid-year, GDP growth of 1.2% would be required in the third. quarter as well as in the fourth to reach 1.4%, which the government predicted. It is ” a lot “we note at the statistical institute.
Lower growth will complicate the difficult exercise of restoring public finances, which the government has declared as a priority. Rather than tax increases, it is counting on a surplus of activity as well as considerable savings to reduce a debt of more than 3,000 billion euros and reduce the public deficit to 4.4% of GDP in 2024 (compared to 4.9% anticipated for 2023), then below the European limit of 3% in 2027. After the end of exceptional crisis support this year, the objective is to save at least 12 billion euros per year from 2025.