By Peter Bergman (MoneyAmped.com)
As a result of the conflicts in Ukraine and Gaza, as well as the decreased economic activity in crucial trade allies Germany and China, the French government has revised its prediction for the expansion of the GDP in 2024 to 1% from 1.4%. Francis Le Maire, the Minister of Finance of France, made this announcement.
In addition, he mentioned that the expenditures of the government would be cut by 10 billion euros ($10.8 billion) across all departments and agencies during an interview with the French television station TF1.
Main Factors of Forecast Changes
Le Maire mentioned that the growth prediction remains optimistic, taking into consideration the updated geopolitical situation. He referred to the conflict in Ukraine and the Middle East, as well as the problems with maritime shipping in the Red Sea and the slowdown in economic activity in China and Germany.
Furthermore, he emphasized that all government departments and organizations would be involved in the budget reductions, and he stated that there would be no increases in taxes or reductions in the benefits that citizens receive from social security.
“We plan to reduce swiftly, in the upcoming days, ten billion euros in government spending,” he announced publicly.
In addition to the five billion euros that were allotted to public policies, he mentioned that there would be a reduction of five billion euros in operational costs across all ministries. The assistance for development is worth one billion euros, and the incentives for residential building renovation are worth another billion euros.
The budgets of state-owned enterprises, such as the export agency Business France and the ANCT agency (Agence Nationale de la Ccohésion des Territoires), will be reduced by an additional billion dollars in order to fund policies implemented by regional governments.
Additionally, the Mayor stated that the authorities would make sure that France remained on track to achieve its objective of reducing the state deficit to 4.4% of GDP by the year 2024 while maintaining its current trajectory.
“We may consider introducing an additional budget during the summer, based on economic conditions and the political environment,” according to him.
The Government’s Main Goals and Vision for the Country’s Future
By the year 2027, the government wants to reduce the budget deficit to a level below the European Union’s 3% cap. This will be accomplished by gradually reducing the deficit over the next few years.
A series of recent reductions in growth forecasts by the European Commission, the Organization for Economic Cooperation and Development (OECD), and the French statistics agency INSEE are more closely aligned with the most recent prediction made by the government.
After having previously estimated that France’s GDP would grow by 1.2% in November, the European Commission lowered its projection for France’s GDP growth in 2024 to 0.9% on February 15. Likewise, it decreased its forecast for Germany from 0.8% to 0.3%, bringing the total percentage down.
The Organization for Economic Cooperation and Development (OECD) lowered its forecast for the expansion of the French economy in 2024 from 0.8% to 0.6% at the beginning of this month.
An optimistic growth rate of 0.2% was forecast by the French statistics agency INSEE for the first and second quarters of the year, which was released on February 7.
A decrease from the 2.5% growth in 2022 and the significant 6.4% surge in 2021 following the Covid pandemic, the French economy expanded by 0.9% in 2023. This represents a decrease from the growth rate of 2.5% in 2022. Currently, one dollar is equivalent to 0.9282 euros.
