The draft budget, presented on 27th September to the Council of Ministers, is affected by a gloomy economic environment which has led the executive to revise downwards to 1.4%, against 1.6%, its forecast for growth in the gross domestic product for next year.
"In 2024, growth will continue to progress," after 1% forecast for 2023, Economy and Finance Minister Bruno Le Maire told reporters.
"It will be driven by our manufacturing production, by the definitive exit from the inflationary crisis and by the recovery of consumption," he continued. "The recession in Germany, the difficulties in China and the persistence of high interest rates will nevertheless have an impact on this growth."
On Thursday, the European Central Bank once again raised its benchmark interest rate to an all-time high, a move to fight inflation but which increases the cost of debt for the France.
Guarantees of seriousness
The burden of the latter, estimated at 38.6 billion for 2023, is expected to reach 48.1 billion next year - the equivalent of the budget planned for defense - and up to 74.4 billion in 2027.
In this more difficult context, and as the verdict in October of the rating agencies Fitch and Moody's on French financial health approaches, the government intends to give guarantees of budgetary seriousness.
It aims to reduce the country's debt from 111.8% of GDP in 2022 to 108.1% in 2027. The public deficit is due to rise from 4.8% of the GDP in 2022 to 4.4% in 2024 and then 2.7% at the end of the five-year period, below the European objective of 3%.
"This acceleration of deleveraging is fundamental at a time when all our European partners are committed to this path," Mr. The Mayor, while inflation is expected to decline to 2.6% next year against 4.9% in 2023, according to the executive.
Government © Economic Forecasts / AFP
No more billions of euros spent on supporting households and businesses in the face of the pandemic, then the energy and inflationary shocks after the Russian invasion of Ukraine.
The government expects to make €16 billion in savings next year, most of which (€10 billion) will come from the gradual removal of the tariff shield for electricity, which has made it possible to contain bills.
"We will get out of frozen prices but we will keep taxation at the floor again in 2024 to guarantee the lowest possible prices for households," Le Maire said.
To this will be added the reductions in aid to companies (4.5 billion) and employment policy (1 billion) as well as 700 million from the reform of unemployment insurance.
Brown vs. green
Other savings already mentioned, such as the abolition of the Pinel aid scheme for new construction (2 billion), the tightening of the zero-interest loan (PTS, 900 million) or the pension reform, will produce their full effects later.
To bring money into the coffers of the State, the government is fine-tuning "a taxation of the surplus profits" of motorway concession companies and intends to raise the excise duty on gas (a tax), "without impact on the consumer," said Le Maire. He also questions the "high" margins of refining, of which TotalEnergies is the number one in France.
It also relies on the fight against fraud (€1.5 billion per year by 2027) and the introduction of minimum corporate tax (€1.5 billion from 2026).
However, according to the minister, this tightening of the screws does not call into question the government's strategy to reduce taxation for companies and households, at the heart of its policy since 2017.
The CVAE, a production tax weighing on companies, will be abolished to the tune of 1 billion next year.
Households will see the income tax scale raised by 4.8%, but they will have to wait until 2025 to see the promise of a tax cut of 2 billion come true.
At the same time, the government also boasts a budget tinged with green: 7 billion euros will be devoted to the energy transition. Brown tax loopholes (favorable to fossil fuels) will be eliminated, such as the one that reduced taxes on non-road diesel.
"All brown tax revenues, to the nearest euro, will go towards the ecological transition and the greening of our economy": "the State does not put a euro in its pocket," assured the minister.
© 2023 AFP