The Government referred to the High Council of Public Finance on 4 April 2023, pursuant to Article 23 of the Organic Law n° 2012-1403 of 17 December 2012 on the programming and governance of public finances, a new draft budget settlement bill for 2021, in order to give its opinion on compliance in 2021 with the multi-year structural balance objectives. In fact, the draft budget settlement bill presented last year, on which the High Council expressed its opinion on 24 June 2022, has not been adopted by Parliament.
The revisions made to the previous budget settlement bill for 2021 are modest. They reflect the changes in GDP and public finance data made in the national accounts. The public deficit is revised upwards in 2020 (from €205.5bn to €208.2bn and from 8.9 to 9.0 pps. of GDP) and in 2021 (from €160.7bn to €162.0bn and from 6.4 to 6.5 pps. of GDP). In 2020, the structural deficit (1.3 pps. of potential GDP) is revised upward by 0.2 percentage points of potential GDP, due to both a higher-than-expected deficit and slightly higher GDP, leading to a reduction in the share of the deficit attributed to the business cycle, in favor of that attributed to the structural deficit. In 2021, the cyclical deficit is reduced slightly (from 2.0 to 1.9 pps. of GDP). The structural deficit is unchanged in 2021, at 4.4 percentage points of potential GDP.
These revisions do not change the assessments made in the opinion issued on 24 June 2022 by the High Council of Public Finance.
The High Council notes that the estimation of the structural deficit (4.4 pps. of potential GDP) presented by the Government for 2021 is 3.2 percentage points higher than forecasted in the programming law (LPFP) of 22 January 2018 (1.2 pps.). This difference is much higher than 0.5 percentage points. It must therefore be considered significant in accordance with Article 23 of the Organic Law N° 2012-1403 of 17 December 2012.
However, the High Council considers that the exceptional circumstances mentioned in Article 3 of the Treaty on Stability, Coordination and Governance (TSCG) are, just like in 2020, met in 2021, affected by the health crisis. As a result, it considers that although the gap between the structural balance and that of the LPFP is significant, this must not lead to the triggering of the correction mechanism for the 2021 exercise.