government forecasts deemed “cautious” by the Higher Council of Public Finance

In the new opinion on the 2021 amending budget and the 2022 PLF, the Higher Council of Public Finance believes that the government is particularly cautious about its forecasts for growth and government deficit. Inflation in 2022, on the other hand, should be higher than the executive’s expectations.

The government is revising its copy. Deemed “incomplete” in September by the Higher Council of Public Finance (HCFP), the adjusted budget for 2021 will be presented to the Council of Ministers this Wednesday. Almost two months ago, the HCFP said it could not express a “fully informed” opinion on this financial account which did not include some purchasing power measures announced in recent weeks, in particular to compensate for the price increase. power.

The new text now contains the additional aid of 100 euros that will be paid in December to the 5.8 million beneficiaries of the energy voucher, or an amount of almost 600 million euros, as well as the inflation allowance of 100 euros for all French who earn less than 2000 euros a month. This is a budget of 3.6 billion euros, which will be complemented by 200 million euros voted in the draft budget for 2022.

Other new credits relate to part of the financing of the skills plan, as well as € 500 million in frost compensation for farmers. In total, this amending budget plans to open € 9.1 billion in additional appropriations and cancel € 7.3 billion, in particular € 2 billion that was budgeted for emergency support.

Growth forecast for 2021 underestimated, that of 2022 “plausible”

In its new opinion, the Higher Council of Public Finance “welcomes” it has been seized again on a budget that is now complete. This allows him to evaluate the government’s new economic forecasts for 2021 and 2022. Starting with growth that should reach 6.25% this year according to the executive and 4% next year.

The first estimate is considered “conservative” by the HCFP while the latest INSEE publication reported a growth surplus at the end of the third quarter of 6.6% in 2021. Clearly, if the evolution of GDP were nil in fourth quarter, growth would still be 6.6% over the year.

For 2022 “the government has taken into account the new measures to support purchasing power and investments that could increase the growth of activity in 2022”, notes the High Council. But the deterioration of the global economic environment with the persistence of supply difficulties and the increase in energy prices could slow the momentum. Why these two elements “play in opposite directions”, notes the HCFP which still believes that the growth forecast of 4% “remains plausible”.

Inflation higher than expected in 2022?

In PLF 2022, the government is aiming for inflation of 1.5% on average in 2021 and 2022. For this year, the forecast on the rise in prices is still “plausible” despite the latest Insee publications (+2, 6% inflation in October) “represent a slight risk of overshoot”, acknowledges the High Council.

The independent body placed at the Court of Auditors is particularly concerned about the coming year. He also recalls that the “price per barrel” of oil was set in October “about 15 dollars above the level considered by the government in its forecasts”, or 84 dollars against 69 dollars. Such an increase would increase inflation by 0.5 points in 2022. This leads the Supreme Council of Public Finance to say that the government’s inflation forecast for 2022 “seems too low”.

Developments in the private sector wage bill and the general improvement in the labor market are other factors that could drive prices up. On this point, the increase in the wage bill from 6.2 to 7.2% estimated by the government for 2021 still appears “too low”, notes the High Council. In fact, Unédic expects salary growth of 8% this year.

Furthermore, the growth of the average wage in 2022, revised downwards by the government (4.7% against 5.2%) could be “stronger” due to the situation of the labor market (fall in the unemployment rate, shortage of labor in some sectors). The same goes for job creation estimated at 60,000 between end 2021 and end 2022. “With the same growth scenario, job creation would be stronger in 2022 if the productivity trend were as weak as they estimate. some institutions “. HCFP.

A public deficit probably “slightly lower” than the government forecasts in 2021

The underestimation of the evolution of the wage bill mechanically misleads the forecast of the public deficit. As part of the draft law on amending finance, the government has revised it down to 8.1 points of GDP, against the 8.4 previously forecast (-6.9 billion euros). But the Higher Council of Public Finance estimates that the public deficit “could be slightly lower than forecast, in particular due to an underestimation of revenues based on the wage bill.”

Revenue from employment and wage bill improvements are also expected to rise in 2022. But “the degree of uncertainty surrounding ‘state’ spending forecasts is significant, given the magnitude of the moves impacting new spending,” he said. affirmed the High Council. Some expenses, in fact, will change according to the energy market prices (charges for public electricity services, fees to gas suppliers for freezing their prices). The disbursement rate of the France 2030 plan is also “subject to the risks of delay in implementation that could have affected previous investment plans”, continues the HCFP. Despite all these unknowns, “the public deficit forecast for 2022 can still be considered plausible”, he believes.

In its opinion, the High Council finally notes that the government expects a public debt ratio of 115.3 points of GDP in 2021 before a decline of 1.8 points in 2022 to stand at 113.5 points of GDP. This is a greater decline than that announced in the September PLF (-1.5). However, this greater decrease “does not derive from a reduction in the public deficit, but from a hypothesis of greater consumption of state liquidity”, regrets the HCFP.

He also regrets that “the additional revenue envisaged is not intended for debt relief, but is, on the contrary, more than offset by additional expenses or measures to reduce mandatory levies”. A statement denied this Wednesday by the Minister of Public Accounts, Olivier Dussopt. Who assured that the additional revenues will be used to “start the debt reduction trajectory, in particular on the debt linked to Covid estimated at 165 billion euros for the state”.

Paul Louis with Gaëtane Meslin with AFP

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