Daily Management Review

France Lowers Its 2024 Growth Estimate As The Economic Outlook Becomes Bleak.


France Lowers Its 2024 Growth Estimate As The Economic Outlook Becomes Bleak.
The French government's estimate for GDP growth in 2024 was dropped to 1% from 1.4%, according to French Finance Minister Bruno Le Maire, as the economic picture was clouded by the conflict in Gaza and Ukraine as well as a slowdown in major trading partners China and Germany.
He added that public spending would be slashed by 10 billion euros ($10.8 billion) across all departments and agencies in an interview with French television station TF1.
"It is a growth forecast that remains positive, but takes into account the new geopolitical context," Le Maire said, citing the war in Ukraine and the Middle East, problems with maritime transport in the Red Sea, and the economic slowdown in China and Germany.
He emphasised that all government ministries and agencies would contribute to the budget reductions, but he noted that there would be no tax rises or reductions in residents' social security benefits.
"We will immediately cut, in the coming days, ten billion euros in state expenditures," he said.
He announced that all ministries would decrease operating expenses by five billion euros, and that an additional five billion euros would go towards public initiatives, including one billion euros for development assistance and one billion euros for subsidies for the repair of residential buildings.
The budgets of state agencies, like Business France, the export agency, and the ANCT (Agence Nationale de la Cohésion des Territoires), which oversees regional government policies, would be further reduced by billions of dollars.
Le Maire added that the administration will ensure France continued to meet its goal of bringing down the public deficit to 4.4% of GDP by 2024.
"We are keeping the option of implementing a supplementary budget in the summer, depending on economic circumstances and the political situation," he said.
In the upcoming years, the administration intends to steadily reduce the budget shortfall until it is below the 3% EU cap in 2027.
The European Commission, the OECD, and the French statistics agency INSEE have all recently downgraded their growth outlooks, which is more in line with the government's revised prediction.
On February 15, the European Commission revised down its estimates for France's and Germany's GDP growth in 2024. For France, it was 1.2% in November and 0.9% in February.
The OECD revised down its prediction for French growth in 2024 from 0.8% to 0.6% earlier this month.
On February 7, the French statistics agency INSEE predicted that the first and second quarters would see only 0.2% quarter-over-quarter growth.
Compared to 2.5% in 2022 and a 6.4% post-Covid surge in 2021, the French economy increased by 0.9% in 2023.