France’s government cut its growth outlook sharply on Tuesday but kept its budget deficit forecast steady despite billions of extra spending on anti-inflation measures thanks to stronger than expected tax revenues.
The finance ministry said that growth was now expected to be 2.5% this year, down from a previous estimate of 4% due to the impact from the Omicron COVID wave at the start of the year and the war in Ukraine.
That is marginally more optimistic than recent forecasts for 2.3% growth from both the central bank and the INSEE official statistics agency, Reuters reports.
Despite the lowered growth outlook, the ministry still expects a public sector budget deficit of 5% of gross domestic product (GDP), unchanged from the estimate that the 2022 budget was based on.
“We’re at 5% even though the economic conditions have changed, in particular because not only tax receipts but also social charges have been dynamic,” a finance ministry official said, putting the extra income at roughly 50 billion euros ($52.7 billion).
The government is due to present bills next Wednesday revising the 2022 budget based on the new forecasts and a package of measures to support households’ purchasing power in the face of surging inflation.
President Emmanuel Macron’s government has already implemented anti-inflation measures worth more than 25 billion euros and the new package is likely to be worth as much, going by figures circulating in the French press and not contested by the ministry.
The finance ministry forecast that French inflation would average 5% this year and estimated that by year-end the national debt would stand at 112% of GDP, marginally lower than the 113.5% previously expected.
