On 9 April, the Government referred to the High Council of Public Finance the macroeconomic and public finance forecasts of the 2025 annual progress report of the national medium-term fiscal-structural plan for the years 2025-2029.
As part of the new European governance adopted in April 2024, Member States submit to the European Commission by April 30 an annual progress report of their medium-term fiscal-structural plan (MTP), which aims to put public debt on a sustainable trajectory. For France, the MTP was validated by the Council on January 21, 2025. Compared with the initial plan, on which the High Council had given its opinion on October 9, 2024, the MTP expenditure trajectory, which serves as the reference, was rectified in January 2025 in line with the amendments to the draft budget bill.
The annual progress report differs from previous Stability Programmes as, in the spirit of the European legislator, it is intended as a follow-up report to the MTP. As a result, it may cover only past and current years. Indeed, in the draft the High Council was referred to, the Government has included projections for future years (2026-29), but the degree of detail is limited. Nevertheless, while Stability Programmes de facto endorsed observed deviations, thus lacking credibility, net expenditure growth targets, which are at the heart of the MTP’s commitment, remain fixed throughout the programming period.
The High Council welcomes the Government's decision to request its advice on the annual progress report, just as it hailed being referred the initial MTP last October. However, this welcome decision was coupled with a deterioration in the conditions under which it was referred to, marked by last-minute schedule changes and extremely tight deadlines, weakening the proper organization of the High Council's deliberations and the exercise of its mandate.
The High Council notes that the international macroeconomic environment is marked by considerable uncertainty, due in particular to the American administration's protectionist initiatives and growing geopolitical uncertainties.
Taking into account the situation to date, the High Council considers that the GDP growth forecast for 2025 (+0.7%), which the Government lowered by 0.2 point compared with the draft budget law (PLF) 2025 amended in January, is not out of reach despite the accumulation of downside risks. This forecast is in line with that presented by some organizations, but exceeds that put forward by others and the consensus of economists. It would be weakened by the materialization of the risks weighing on the international environment in particular.
The inflation forecast for 2025, maintained at +1.4%, remains slightly high, particularly in light of the fall in oil prices and the appreciation of the euro observed recently, which exceed the assumptions made by the Government. The wage bill growth forecast for the nonfarm market sector (+1.9%), though revised downwards, also remains slightly high. While the employment forecast is plausible, that for average wages per head assumes an acceleration compared with recent quarters, which is not the most likely assumption in view of disinflation and the current labor market situation.
The economic scenario presented for the years 2026 to 2029 is limited to a forecast of growth and potential GDP. The growth assumption for 2026 (+1.2%, 0.2 point lower than in the MTP) implies that international uncertainties recede and that the budgetary adjustment has a limited impact on activity. Given the adjustment considered, this forecast requires an acceleration in private domestic demand, the scale of which is far from guaranteed. The potential GDP scenario, unchanged from the MTP, is reasonable, on condition that economic policy does enable a recovery in productivity gains and a continued rise in the employment rate.
The revenue forecast for 2025 takes into account the significant contribution of mandatory levies increases, some deemed temporary, introduced this year for a total of €23 bn (or 0.8 point of GDP), a figure revised slightly downwards. Excluding these measures, the High Council notes that the forecast for spontaneous growth in compulsory levies is broadly consistent with economic forecasts, and therefore slightly high like the latter. The High Council also notes that the safety margin included in the yield forecast for certain levies in the amended January PLF has been abandoned, thus directly exposing this forecast to the materialization of macroeconomic risks or further downward surprises.
In terms of expenditure, the Government is forecasting a 1.3% rise in volume in 2025, lower than in 2024 but still not enough to reduce the weight of public expenditure in GDP. The savings effort, strictly speaking, falls almost entirely on the State and would be increased for the latter by additional freezing measures. The inadequacy of mechanisms for steering public expenditure as a whole weakens the outturn forecast.
Overall, given the current state of cyclical information, and taking into account a slightly less deteriorated outturn in 2024 than expected in January (deficit of 5.8 points of GDP in 2024 instead of 6.0 points), the High Council considers that the public deficit forecast for 2025 (5.4 points of GDP) can be met, but this is far from being secured yet. This requires strict control of expenditure directly steered by the State and social expenditure, and confirmation of the recent slowdown in local authorities’ expenditure. The margins of safety and the capacity to react in the event of another unfavorable shock appear very limited. Moreover, public debt is set to rise by a further 3 points of GDP in 2025.
With regard to compliance with the MTP trajectory, the High Council notes that net expenditure growth, expressed in current euros, would be slightly higher in 2025 than required (+0.9% versus a cap of +0.8%). The Government should strictly respect the annual growth limit in 2025. By allowing itself a slight overrun, it is reducing its precautionary margin with regard to the new rules.
The trajectory of public finances beyond 2025, which is only sketched out in the documents presented, remains to be specified and made credible. The recovery effort considered is a reduction in the primary structural deficit of 0.9 points of GDP in 2026, then of around 0.7 points of GDP per year thereafter. Such an adjustment, which would only enable the debt to be reduced from 2028 onwards after a new high point of 118 points of GDP in 2027, is nevertheless imperative to restore public finances, control public debt and meet France's European commitments, in particular the return of the deficit to below 3 points of GDP in 2029, of which the High Council reiterates the imperative need. Once again, the High Council stresses that this necessary deficit reduction requires a coherent and credible strategy for reducing the weight of public expenditure in GDP, and for the evolution of compulsory levies.