Thursday, 20 January, 2022

Deficit, growth: the executive scenario raises doubts among budget wise men


The High Council of Public Finance estimates that the government’s forecast of a recession at 8% and a public deficit at 9% of GDP could still be optimistic. Bercy hopes for a rapid return to normal in activity after the end of confinement, a “strong hypothesis” according to him. In 2020, the level of public expenditure will reach a record, at 60.9% of GDP.

The government presents this Wednesday its corrective finance bill for 2020.

How far are we going to dig? The corrective finance bill (PLFR) presented this Wednesday in the Council of Ministers by the government provides for a recession and a record deficit, never seen since the end of the Second World War. But yet this scenario seems optimistic in the eyes of budget wise men. The High Council of Public Finances thus publishes this Wednesday morning an opinion which exposes serious doubts on the financial trajectory of the post-coronavirus executive. “The public deficit could be more degraded than expected by this PLFR”, is it written.

Several reasons explain the doubts of this independent institution responsible for the role of watch over budget forecasts. First on the activity. With a recession of 8% as forecast by the government, we would already be well beyond the low point of -2.9% reached in 2009 after the great financial crisis. However, this figure for 2020 can still be seen as too optimistic: the High Council “Notes that this economic scenario is based on the strong assumption of a fairly rapid return to normal in activity, beyond May 11”, end date of strict confinement.

The High Council of Public Finance estimates that the government’s forecast of a recession at 8% and a public deficit at 9% of GDP could still be optimistic. Bercy hopes for a rapid return to normal in activity after the end of confinement, a “strong hypothesis” according to him. In 2020, the level of public expenditure will reach a record, at 60.9% of GDP.

The government presents this Wednesday its corrective finance bill for 2020.

How far are we going to dig? The corrective finance bill (PLFR) presented this Wednesday in the Council of Ministers by the government provides for a recession and a record deficit, never seen since the end of the Second World War. But yet this scenario seems optimistic in the eyes of budget wise men. The High Council of Public Finances thus publishes this Wednesday morning an opinion which exposes serious doubts on the financial trajectory of the post-coronavirus executive. “The public deficit could be more degraded than expected by this PLFR”, is it written.

Several reasons explain the doubts of this independent institution responsible for the role of watch over budget forecasts. First on the activity. With a recession of 8% as forecast by the government, we would already be well beyond the low point of -2.9% reached in 2009 after the great financial crisis. However, this figure for 2020 can still be seen as too optimistic: the High Council “Notes that this economic scenario is based on the strong assumption of a fairly rapid return to normal in activity, beyond May 11”, end date of strict confinement.