The International Monetary Fund (IMF) called on the government to take “new savings measures” from 2024 in order to avoid a slippage in public finances (AFP/Archives/Olivier DOULIERY)
The International Monetary Fund (IMF) on Thursday called on the government to take “new savings measures” from 2024 in order to avoid a slippage in public finances, at a time when a new unemployment insurance reform is being presented to the social partners.
“New budgetary consolidation measures are recommended in the medium term starting in 2024, in order to bring the debt back on a downward trajectory,” writes the IMF at the conclusion of a mission to France called “article 4”, which expects a deficit public of 4.5% of GDP in 2027, “significantly higher” than the 2.9% planned by the government.
This difference is due, according to the international organization, to the fact that “the main review and expenditure savings measures which underlie the planned adjustment remain to be identified”.
The Washington institution’s short-term forecasts, however, do not take into account the latest announcements from the government, which affirmed in April that it was banking on a “realistic and ambitious” objective to come back below the deficit limit set by Brussels.
The executive plans in particular a budgetary effort of 20 billion euros in additional savings in 2024, then another 20 billion in 2025.
The Minister of Economy and Finance Bruno Le Maire, May 17, 2024, in Ergue-Gabéric, in Finistère (AFP/Archives/FRED TANNEAU)
“We will do everything necessary to return below the 3% public deficit in 2027,” declared the Minister of Economy and Finance, Bruno Le Maire, estimating that the IMF report “fully validates the economic strategy and financial affairs of the government.
“When you cut (…) operating expenses, expenses that are not investment expenses and expenses that are neither for new technologies nor for decarbonization, (…) you increase your growth potential,” he added.
For 2024, the IMF estimates the additional measures necessary to reduce the deficit to 4.9% at 0.4% of GDP, “of which 0.3% has already been announced in the government’s stability program (PSTAB)” in April. .
“We are talking about a difference of 0.1% of GDP, which is not very significant,” said the head of the IMF mission for France, Manuela Goretti, during a press conference on Thursday.
For now, the IMF is counting on a public deficit of 5.3% of GDP in 2024, when the government is banking on 5.1%.
Before the IMF, the High Council of Public Finances (HCFP) estimated, in mid-April, that the forecasts for reducing the deficit by 2027 lacked “credibility” and “coherence”.
– Target unemployment benefits –
Among its savings recommendations, the IMF insists on targeting unemployment benefits and support measures for workers and businesses or reforming tax expenditures. He also insists on the reduction in the public sector payroll, which he believes can be reduced by limiting overlap between administrative levels.
“In the absence of additional measures, the debt would reach 112% of GDP in 2024 and would increase by around 1.5 percentage points per year in the medium term,” he warns.
Minister of Labor Catherine Vautrin on May 23, 2024, in Paris (AFP/STEPHANE DE SAKUTIN)
The Minister of Labor Catherine Vautrin is presenting to the social partners on Wednesday and Thursday the government’s plans for reforming unemployment insurance, with tougher conditions of access to compensation.
The measures envisaged would allow 3.6 billion euros in savings, according to the executive which hopes that, thanks to them, 90,000 additional people will be employed.
“All of the recommendations (of the IMF) are already implemented in terms of public finances”, affirmed Bruno Le Maire citing, in addition to unemployment insurance, pension reform, expenditure reviews or even the desire of simplification.
The IMF’s economic analysis comes eight days before the publication by the S&P Global agency of its rating for France, after the status quo of the Moody’s and Fitch agencies at the end of April.
According to their respective press releases, neither Fitch nor Moody’s believe the deficit will return below 3% in 2027, a bar which meets a requirement of the EU Stability Pact.
In its conclusions, the IMF adds that the macroeconomic hypotheses put forward by the government “could prove (…) optimistic”, at a time when France is banking on growth of 1% this year, higher than that of the main economic institutes, including the IMF, which expects 0.8%.
For 2025, he anticipates 1.3%, “very close” to the government’s forecast (1.4%), underlined Bruno Le Maire.
© 2024 AFP
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