Opinion on the budget bill and social security financing bill for the year 2024

On 15 September 2023, the Government referred to the High Council of Public Finance the macroeconomic forecasts and the introductory article of the budget bill and social security financing bill for 2024.

Opinion's summary

The High Council considers that the Government's macroeconomic scenario for 2023 is plausible. Thanks to stronger-than-expected growth in the 2nd quarter, the Government's forecast (+1.0% annual average), unchanged, is no longer above the range of available estimates. The inflation forecast, albeit still a little low, and the wage bill forecast are also plausible.

The public deficit forecast for 2023 (4.9 percentage point of GDP) is plausible, particularly given the information available for the first seven months of the year, even if some tax receipts and the amount of some expenditure, notably investment by local authorities, remain uncertain.

For 2024, the High Council considers that the growth forecast (+1.4%), higher than that of the consensus of economists (+0.8%) and the organisations it held hearings with, is high. For all demand components (consumption, investment, exports), the Government is more optimistic than these organisations. In particular, the growth forecast assumes that the tightening of credit conditions has already had most of its impact, particularly on household investment. The High Council notes the significant uncertainties surrounding the analysis of the economic situation, due in particular to the current difficulties in understanding many behaviours (high household savings rate, low productivity, for example).

The inflation forecast for 2024 (+2.6%) is plausible. However, there is a risk that it will be exceeded, due in particular to the recent trend in oil prices. The wage bill forecast for the non-agricultural market sectors (+3.9% excluding the profit-sharing contribution) is also plausible, the optimistic nature of the employment forecast being offset by an assumption of a slowdown in per capita wages which seems too marked.

The public deficit forecast for 2024 (4.4 percentage point of GDP) combines mainly favourable assumptions and appears optimistic. The forecast for taxes and social security contributions is driven upwards by the high activity growth forecast and, beyond that, by favourable assumptions on some tax receipts (growth in VAT higher than that of its tax base, halt in the decline in revenues from the duty on real property transactions). In addition, expenditure is likely to turn out higher than forecast, particularly in terms of the cost of energy devices and healthcare spending (Ondam).

While the Government's scenario is characterised by the end of the health and energy crises, the High Council notes that, despite the end of support measures, spending will continue to rise significantly in 2024, more than recommended by the European Union (nominal increase in net primary expenditure of 2.6%, against a recommended ceiling of 2.3%), and this although the European Commission has announced the end of the general escape clause in the Stability Pact as of 2024. While the significant rise in interest expenditure contributes to increasing public expenditure, the budget bill contains few structural savings measures, despite the first round of spending reviews in 2023, and forecasts a quasi-stability of the rate of compulsory levies.

As a result, the Government forecasts that the public debt ratio, after a decline in 2023 thanks to unusually strong GDP growth in value terms, will not decrease in 2024. The expected stabilization of the debt ratio in 2024 is fragile, as it is based on growth and expenditure optimistic forecasts. Thus, France, which has seen its relative debt position within the euro zone deteriorate in recent years, would maintain a high level of debt in 2024.

The medium-term sustainability of public finances therefore continues to call for the utmost vigilance. The High Council points out that the return to debt levels enabling France sufficient fiscal space is required to be able to cope with future macroeconomic or financial shocks, and with the high public investment needs required in particular by the ecological transition.