Moody’s doubts that France will manage to reduce its deficit to 2.7% by 2027

PARIS (Reuters) – The higher than expected level of the public deficit recorded in France in 2023 makes the objective of reducing it to 2.7% by 2027, as committed by the government, unlikely, Moody’s warned Wednesday.

The rating agency also underlines that the ten billion euros in budget cuts recently announced by the government will undoubtedly not be such as to enable it to achieve this year the objective of a public deficit of 4.4 % of its gross domestic product (GDP).

INSEE announced on Tuesday that the public deficit rose to 5.5% of GDP last year, more than the 4.9% forecast by the government and the 4.8% for 2022.

This deterioration of public accounts is bad news for the government as the rating agencies must soon revise the rating assigned to France.

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Moody’s and Fitch will announce the results of their assessments on April 26, while S&P Global Ratings will decide on May 31.

“Although the government has not changed its budgetary targets, the higher than expected deficit in 2023 makes it unlikely in our view that the government will be able to reduce the deficit to 2.7% of GDP by 2027 “, underlines Moody’s vice-president, Sarah Carlson, in a research note.

Citing lower tax revenues than expected to explain the slippage in the deficit, against a backdrop of slowing inflation, the French Minister of Economy and Finance, Bruno Le Maire, on Tuesday called on public authorities to agree to new budget cuts.

(Leigh Thomas; French version Nicolas Delame and Tangi Salaün, edited by Zhifan Liu)