Finance Minister Bruno Le Maire on Friday said the French government expects a slightly bigger public sector budget deficit next year. That is, as extra spending to soften the blow from energy prices offsets higher tax revenues.
The financial shortfall, however, is expected to be smaller than expected this year. That is due to the economy rebounding from the pandemic crisis more than anticipated; thus, generating extra tax revenue.
Earlier this month, the government revised its 2021 growth forecast to 6.25% from 6% previously. Le Maire said this meant an extra 4 billion euros ($4.65 billion) in tax revenue could be expected this year and 5.2 billion next year.
Consequently, instead of the 8.4% pencilled into the government’s budget planning last month, the public deficit was expected at 8.1% of gross domestic product this year.
However, 2022 deficit was expected to narrow to 5.0%. That is, instead of the 4.8% estimate when the 2021 budget bill was released last month. That was because new spending of about 10.2 billion euros next year was expected to offset the government’s extra tax revenues.
The government now expected to spend 6.2 billion euros on measures to soften the impact of higher energy prices next year, Le Maire said. Another 2.8 billion euros were budgeted for a recently announced investment plan. Additionally, another 1.2 billion for a soon-to-be announced training programme.
France Offers Energy Inflation Aid
Aside from the recently announced electricity and gas price caps, Prime Minister Jean Castex on Thursday said that lower-income households would receive 100 euros from the government. That is to help mitigate the impact of rising energy prices, those at the petrol pump in particular.
The premiere called the payment an “inflation payout” that would be made to citizens earning less than 2,000 euros net per month. This inflation payout would cost the treasury 3.8 billion euros.
Six months from a presidential election, President Emmanuel Macron is seeking to limit damage to his economic record from spiraling energy prices.
Castex said in an interview on TF1 television, they believe that this increase in prices is temporary, however, they cannot let it hobble the recovery. He said the government had already scrambled in recent weeks to cap gas and electricity prices and to help the poor pay winter heating bills. That is as energy prices jumped worldwide on the post-pandemic economic recovery.