Trésor-Info - Publications de la direction générale du Trésor - Budget-bill

Review of the French Government’s Economic Forecasts for 2024

2025-08-28T00:00:00+02:00

When drawing up the macroeconomic scenario for the 2024 Budget Bill presented in September 2023, we expected that 2024 would see a gradual cushioning of the shocks that had hit the economy. As such, expectations focused on an upswing in growth bolstered by a ramp-up in household consumption. The main contingency identified in the forecast concerned the pace and extent to which monetary tightening would affect both real GDP and the financial sphere.

GDP growth in 2024 (up 1.2% according to INSEE’s annual accounts published in May 2025) fell short of the 2024 Budget Bill forecast of 1.4% and broke down differently than expected due to a fresh wave of shocks that were largely unforeseeable in autumn 2023.

The deterioration in the international environment, particularly the second consecutive year of recession in Germany, curbed French exports. Meanwhile, uncertainties at both international (tension in the Middle East in particular) and national level (dissolution of the French National Assembly) put a drag on investment. The catch-up following productivity losses since the COVID-19 pandemic has been faster than anticipated, leading to a more pronounced slowdown in employment. Lastly, the faster-than-anticipated drop in inflation failed to boost consumption due to the less favourable breakdown of purchasing power gains.

Nevertheless, some of these negative shocks were absorbed by a fall in imports, partly replaced by inventory rundowns, and by rising public demand, mainly concerning local authorities and healthcare spending. Despite the adverse impact on the government deficit, increased public demand naturally buoyed up economic activity.

Review of Public Finance Forecasts for 2023 and 2024

2025-01-20T00:00:00+01:00

The economic and public finance forecasts for 2023 and 2024 were drawn up amid much uncertainty with highly volatile energy prices, a very high inflation rate and unprecedented monetary policy tightening.

For 2023, while real growth was closely aligned with the forecast (0.9% vs 1.0%), high levels of inflation provoked more substantial revisions of nominal growth, that was initially projected at 4.6% in autumn 2022 then at 6.8% a year later, and which ultimately stood at 6.3%. For 2024, real growth, that was first forecast at 1.4%, was revised downwards to 1.1%, and the nominal growth forecast was reduced from 4.0% in autumn 2023 to 3.5% a year later as it was affected by the faster-than-expected fall in inflation.

The 2023 general government deficit was –5.5% of GDP (–5.3% excluding the change of base year for the national accounts by Insee, the National Institute of Statistics and Economic Studies), compared to the projection of –4.9% in autumn 2023. The 2024 deficit figure has not yet been finalised: the most recent official forecasts were for –6.1 % of GDP, following a projection of –4.4% in autumn 2023, that was revised to –5.1% in April 2024. These revisions are significant but not unheard of from a historical standpoint.

In 2023, the spontaneous growth in aggregate taxes and social security contributions, i.e. without factoring in discretionary measures, was much lower than that of nominal growth (2.6% vs 6.3% for nominal GDP), in contrast to 2022 which was an exceptional year. Such a contrast was anticipated as early as July 2022 but its scale was much larger than projected. Central government expenditure was lower than forecast unlike local authority expenditure.

In 2024, revenue from aggregate taxes and social security contributions was subject to major reassessments due to unexpected events in 2023 that were heightened by the delayed functioning of corporation tax and income tax. It was also slowed by lower nominal growth in GDP that was less driven by private domestic demand, and which had an impact on VAT revenue. In addition, there was a surprisingly high level of local authority expenditure whilst central government expenditure is expected to be lower than provided for in the 2024 Initial Budget Act due to management measures introduced during 2024.

Update

Following the publication by Insee, the National Institute of Statistics and Economic Studies, of the general government accounts, the 2024 general government deficit was ultimately −5.8%, that is to say 0.3 points of GDP more than the projection used in the 2025 Budget Bill and on the basis of which this edition of TrésorEconomics was produced in January 2025.

Revisions constitute an overall improvement of roughly €9.5bn and essentially concern:

• local authority expenditure (+€6.5bn), which turned out to be lower than expected when the 2025 Budget Bill was being prepared, due to a slowdown in this local expenditure starting in autumn 2024. For instance, local authorities’ investment expenditure rose 7.6% in 2024 compared to the 13.2% increase forecast in the 2025 Budget Bill, which was based on the latest accounting data from summer 2024. Operating expenses rose by 3.5% but this was still significantly less than the 4.6% projected in October 2024.

• central government expenditure (up €3.4bn), was less than forecast in autumn 2024 owing to a budget outturn that was even lower than estimated in the Initial Budget Act.

• the 2023 deficit was also revised to −5.4% of GDP, i.e. up 0.1 points compared to the provisional account published by Insee in May 2024.

Table 1 relating to the revision of the general government balance in 2023 and 2024 between the budget bills for 2024 and 2025 has been updated as follows :

Review of the French Government’s Economic Forecasts for 2023 and 2024

2024-12-19T00:00:00+01:00

The macroeconomic scenario of the 2023 Budget Bill, presented in September 2022, was drawn up amid great uncertainty. The repercussions of the Russian offensive in Ukraine on energy supply in particular, and the impact of monetary tightening in response to soaring inflation were major unknowns when calculating forecasts.

Despite this uncertainty, 2023 GDP growth (0.9% based on annual INSEE accounts published in May 2024) nearly matched the 2023 Budget Bill forecast (1.0%). The Consensus Forecasts, which estimated growth of 0.6% in September 2022 and which had hit a low point of 0.1% in December 2022, gradually converged with the French government forecast.

The main economic forecast assumptions were confirmed: winter 2022/2023 saw no energy supply shortages, and the French economy benefited from a catch-up effect, particularly in aircraft manufacturing and electricity generation. Growth drivers on the other hand were more balanced than envisaged in the Budget Bill: growth was sustained to a greater degree by foreign trade and to a lesser extent by consumption, with the savings rate remaining high. While business investment proved more resilient than expected, household investment fell further.

The 2023 Budget Bill forecast predicted a peak in inflation in early 2023, followed by a gradual decrease. This forecast was correct, with inflation reaching its peak in February 2023 and declining for the rest of the year, due to a drop in energy prices and then in food prices. Overall inflation for the year was however higher (4.9%) than the 2023 Budget Bill forecast (4.2%), which itself was higher than the Consensus Forecasts (3.6%).

The macroeconomic scenario underlying the 2024 Budget Bill, which was submitted in September 2023, forecast a pickup in growth in 2024 (1.4%). This growth forecast was reviewed downwards in February 2024: the adjusted economic scenario was set out in the 2024-2027 Stability Programme published in April 2024. This forecast for 2024 was adjusted upwards to 1.1% in the 2025 Budget Bill submitted in October 2024. The adjustment to the initial forecast was made primarily because of a less buoyant international environment and more sluggish consumption, despite faster disinflation than expected.

World Economic Outlook in Autumn 2024: Monetary Easing and Geopolitical Tensions

2024-09-19T00:00:00+02:00

Global growth is expected to reach 3.2% in 2024, a similar rate to 2023, before increasing to 3.4% in 2025. This outlook is a slight improvement on forecasts released in spring 2024. In 2025, global activity is anticipated to grow at the same pace as in the second half of the 2010s, supported by monetary policy easing and strong performances in emerging countries.

Growth is forecast to remain uneven across advanced economies. In 2024, activity is expected to be particularly robust in the United States and Spain, more moderate in Italy and the United Kingdom and flat in Germany. These advanced economies are experiencing different levels of growth due to disparities in consumption patterns and export performance. Growth rates are expected to converge in 2025, with an acceleration of activity in the euro area and a slight slowdown in the United States, primarily due to a weakening of household consumption.

Although still strong, activity in the major emerging economies – China, India, Brazil and Turkey – is projected to slow compared with 2023, particularly in China where structural imbalances are likely to continue to weigh on activity.

Following a contraction in 2023, global trade is anticipated to recover in 2024 and accelerate in 2025. Global trade is expected to be driven primarily by emerging economies and the United States, resulting in slower growth in global demand for French exports (see Chart).

Global activity could nonetheless be impacted by an escalation of geopolitical tensions, which are the main risks surrounding this scenario.

World Economic Outlook in Autumn 2023: The Economy is Holding Out Against Rising Interest Rates

2023-09-12T00:00:00+02:00

Global growth is expected to slow to 3.0% in 2023, down from 3.5% in 2022. This is primarily due to the tightening of monetary policy to cut inflation. In 2024, the world economy should grow at the same pace (3.0%) which will still be below its pre-COVID average, as the continuing slowdown in advanced countries is being offset by more robust growth in certain emerging ones.

In advanced economies, economic activity held up better than projected during the first half of 2023. In Europe, the supply of energy this winter has been secured and the supply-chain problems facing businesses have eased. The slowdown in growth in 2023 and 2024 is chiefly the result of monetary tightening and its effect on investment. Each country’s growth path is also contingent on its residual catch-up capabilities following the COVID-19 pandemic, especially as regards consumption, which are greater in the euro area than in the United States, and on the extent of its exposure to world trade which is putting a drag on Germany in particular.

In emerging economies, growth is set to remain vibrant overall in 2023 but could show the first signs that it is running out of steam. As an example, China should experience a more limited recovery (+5.0%) than first forecast, due to the weak upturn in consumption and little support from the authorities against the backdrop of the real estate crisis. In 2024, it is estimated that most emerging economies will benefit from a reduction in inflationary pressure and the relaxing of monetary policies.

It is projected that world trade will slow significantly in 2023 in the wake of the severe contraction in trade during winter 2022-2023, before returning to normal levels in 2024. World demand for French exports (see Chart) should fall slightly in 2023 due to lower imports in advanced countries before bouncing back in 2024, driven by faster growth in the euro area.

The main risks to this scenario are changes to inflation and the effect of monetary policy on economic activity and on the financial sector.

Public Deficit on Target in 2022 Despite the Energy Crisis

2023-07-28T00:00:00+02:00

The 2022 public deficit published by the National Institute of Statistics and Economic Studies (INSEE) on 31 May 2023 stood at 4.7% of GDP. This figure is close to the 5.0% of GDP target set out in the 2022 Budget Bill, as revised on 22 October 2021, and upheld in the two 2022 Supplementary Budget Acts.

However, an imported inflation shock of more than 4 percentage points in 2022 had a strong impact on revenues and expenditure through several channels.

Spontaneous growth of taxes and social security contributions outstripped GDP growth by a wide margin. This major stylised fact was incorporated into the forecasts in the first 2022 Supplementary Budget Bill in July 2022. It stemmed primarily from the components of growth, the strength of wage growth and the large increase in taxable corporate profits in 2021, which has a lagged impact on government revenues.

The inflation shock affected expenditure in two main ways: (i) the indexation of certain expenditure; (ii) the measures implemented since the end of 2021 to protect businesses and households from inflation.

In the fourth quarter of 2021, it was impossible for the Budget Bill to foresee the scale of the energy shock or the measures that would be introduced to support households and businesses. However, the capacity for rapid revisions of forecasts to allow proportionate discretionary tax measures and resolute commitments to the deficit target made it possible to attain a deficit that was close to the original target, despite the shocks affecting revenue and expenditure (see Chart).