On 25 October 2024, the Government referred to the High Council of Public Finance of issuing an opinion on the macroeconomic forecasts associated with the end-of-year budget bill (PLFG) for 2024, on the realism of the revenue and expenditure forecasts and on the consistency of this draft bill with the multi-year path for the structural balance.
This draft end-of-year budget bill (PLFG) for 2024 is based on the same macroeconomic scenario and has the same public deficit forecast as the draft budget bill (PLF) for 2025, on which the High Council issued an opinion last 8th October.
The High Council considers that the Government's growth forecast for 2024 (+1.1%) remains realistic. The quarterly national accounts published by INSEE after the referral to the High Council, which indicate a growth rate of 1.1% at the end of the third quarter of 2024, support this assessment.
The inflation forecast (+2.1%) is also realistic, although a little high given the provisional results of the October consumer price index published by INSEE, also after the referral to the High Council, and the fact that oil prices were lower at the end of October than in the Government's forecast.
The wage bill growth forecast in the nonfarm market sector (+2.9%) is consistent with the latest information available, particularly from URSSAF.
The High Council considers that the Government's forecast for the public balance in 2024 of €178.2bn, or -6.1 points of GDP, remains plausible. The forecast for public revenue and expenditure is consistent with the information published since the High Council's opinion on the 2025 PLF, in particular the State's monthly budget situation at the end of September.
This represents an exceptionally large deterioration excluding periods of crisis of 1.7 points of GDP (€50bn) compared to the public deficit forecast of 4.4 points of GDP (€128bn) included in the PLF for 2024, which the High Council considered to be optimistic at the time.
On the revenue side, compulsory levies are now expected to reach €1,250.7bn in 2024, compared with €1,292.2bn in the PLF, a difference of €41.5bn. Around half of this difference (€22.6bn) is due to a starting point that is much worse than forecast, as a result of the 2023 results. The additional shortfall attributable to 2024 amounts to €18.9bn.
On the expenditure side, the forecast has been revised upwards in this PLFG by around €15bn. While spending by the State and other central government bodies is expected to remain slightly below the PLF forecast, spending by social security authorities and, even more so, local authorities is expected to rise at a faster rate than forecast in autumn 2023.
The major slippage in public finances in 2023 and 2024 demonstrates the need, in order to present a reliable trajectory for public finances, to use cautious assumptions in the financial texts, particularly with regard to revenues or the moderation of local authority spending, when there are no robust mechanisms in place for this purpose.
The Government's estimation of the structural balance is also unchanged from the PLF for 2025, at -5.7 points of GDP. The difference between this forecast and the target set in the public finance programming law (PFPL) is therefore 2 points of GDP. It is well over 0.5 point, which suggests that it will be significant under the definition of the Organic Law when the High Council examines the draft budget settlement bill for 2024.
However, as the High Council of Public Finance pointed out in its opinion on the PLF 2025, the PFPL for the years 2023 to 2027, which was enacted less than a year ago, is already an outdated reference due to the significant deterioration in public finances in 2023 and again in 2024. The trajectory of the medium-term fiscal-structural plan communicated to the European Commission provides a more relevant reference, even if the HCFP regretted, in its opinion on the MTP published on 9 October 2024, that the information transmitted in this occasion was insufficient to assess its realism.
The High Council notes that in 2024, the increase in the deficit, combined with the fall in inflation, will result in a significant rise in the public debt ratio, forecast at 112.8 points of GDP, i.e. +2.9 points compared with 2023.
The High Council of Public Finance reiterates that guaranteeing the medium-term sustainability of public finances requires both immediate and sustained efforts over time. In this respect, it is essential that France respects the medium-term trajectory of the fiscal-structural plan in order to keep control of its public finances, control its debt and avoid seeing its position continue to erode within the eurozone, while at the same time financing priority investments and preserving its growth potential.