The High Council of public finance delivered on 21 September 2022 an opinion on the public finance programming bill for the years 2023 to 2027.

Opinion's summary

The draft public finance programming bill for the years 2023 to 2027 is based on a macroeconomic scenario that is almost identical to the one of the Stability Programme for the years 2022-2027, even though the High Council considered it necessary to correct several elements in its opinion n°2022-3 of the 26th July 2022. In particular, the High Council called for a revision of the assumptions of the output gap and potential growth on a more prudent basis.

Consequently, the High Council reiterates its assessment that, on the one hand, the assumptions of the output gap in 2022 (-1.1 percentage points of potential GDP) and, on the other hand, of potential growth (1.35% per year from 2022 to 2027) are optimistic, in particular because the latter assumes significant and immediate effects of reforms (of the minimum income scheme, pensions, unemployment insurance, apprenticeship…) of which neither the modalities, nor the impacts, nor the timetable are documented.

As already pointed out in its opinion on the Stability Programme, the High Council notes that the detailed macroeconomic scenario for reaching the expected level of potential GDP in 2027 is based on very favourable assumptions of a continued decline in the household savings rate resulting in supporting consumption, a persisting high rate of business investment and a positive contribution of foreign trade to growth over the entire period.

The Government expects inflation to return to a level consistent with the ECB’s target from 2026, along with a moderate rise in interest rates, even though the rate hike needed to curb inflation remains highly uncertain.

The High Council of public finance considers that the public finance trajectory presented by the Government is unambitious especially with respect to France’s European commitments. The draft programming law does not aim a rapid return towards the medium-term objective of balanced public finances, to which France has committed itself, and the planned change in the debt trajectory is limited and late, even though the growth assumptions are optimistic. Moreover, the effort to contain expenditures and the planned increase in certain revenues (as elimination of loopholes, fight against fraud) included in the programming law are only partially documented.

To ensure the sustainability of its public finances, France, which is among the most indebted countries in the euro zone and has a high tax and social contribution rate, needs a solid programme to contain expenditure.