France’s 2024 budget deficit even narrowed more than anticipated, providing the government with a reprieve as it strives to reduce its debt. The deficit surged to 5.8% of national economic output from 5.4% in 2023, according to the national statistics agency Insee. That is nevertheless lower than the Finance Ministry’s own forecast of about 6%.
This less-than-expected deficit shortfall provides some relief following previous disappointments in deficit reduction efforts during the COVID-19 pandemic and inflationary pressures. The fiscal challenges were also exacerbated by prolonged political uncertainty after the snap elections last year, triggering a bond-market sell-off.
The result also gives the government a better baseline as it intends to bring down the deficit to 5.4% of gross domestic product (GDP) this year and reach the European Union’s 3% level by 2029. The targets come up against rising hurdles because of slow economic growth and President Emmanuel Macron’s vows to boost defence expenditure as part of a pan-European rearmament drive.
Despite likely increases in defence expenditure, France’s Finance Minister Eric Lombard has maintained that the nation will remain on its budgeted path, and intimated that fiscal reduction will need to be done in other areas. The country has received many warnings over the past several months from rating agencies. Credit rating agency Moody’s reduced the rating of France last December, and S&P and DBRS have issued negative ratings since the beginning of the year.
In 2024, French government spending increased by 3.9%, following 3.7% of last year, as per Insee. While that, growth in tax collection accelerated to 3.1% from 2.2%. Public debt in the country reached 113% of GDP by the end of 2024, from 109.8% as of 2023. Put in perspective, in 2019 prior to the pandemic, debt in terms of a percentage of GDP had stood at 97.9%.
