The Higher Council of Public Finance considers the government’s inflation forecasts “too low”

The judges of the Higher Council of Public Finance (HCFP). “too short“the inflation of 1.5% expected for next year, which the government has not changed”,despite the increase in energy prices and a marked improvement in the labor marketwhich could pull the level of wages and prices according to a warning released Wednesday.

On this point, the head of INSEE’s economic affairs department, Julien Pouget, questioned on Wednesday by several deputies who are members of the National Assembly’s economic affairs committee, is betting on slightly higher inflation.What should we expect? Assuming that the price of oil stops rising, the diffusion effects in services and manufactured goods should continue into the next year as well. Inflation could approach 2% ” he has declared.

However, the other experts interviewed predict a slowdown in price growth between 2021 and 2022. “Inflation expectations have certainly increased in recent months, but remain at moderate levels in line with the objectives of the European Central Bank. The downward trend in inflation should take shape in 2023 in the euro area” said Nathalie Dezeure, director of macroeconomic research at Natixis.

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The additional revenue was not used to repay the debt regrets of the HCFP

The institute attached to the Court of Auditors regrets that the additional revenue collected by the state thanks to improved economic growth is no longer destined for debt reduction. “The High Council notes that, contrary to what is recommended in the opinion of September 17, 2021, the planned additional income is not intended for debt reduction, but is, on the contrary, more than offset by additional expenditure or tax reduction measures mandatory “, is stated in this opinion on the draft amending budget for 2021 and on the revisions of the draft budget for 2022.

The draft amending budget for 2021 is presented to the Council of Ministers on Wednesday and the draft budget for 2022 is under consideration in the Parliament, but the government has introduced substantial changes, prompting it to consult again, at its request, the HCFP, an independent body tasked with assessing the credibility of budget forecasts.

During its first referral, the HCFP therefore deplored a text “incomplete“, believing that it cannot give an opinion on the public deficit forecasts. Since then, the executive has in particular announced 10.2 billion euros of additional spending in 2022, in particular to support the purchasing power of facing families. to the increase in energy prices, in addition to those that will come into force from 2021 (additional energy voucher, etc.)

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Added to this is the France 2030 investment plan, with an initial budget of 3.5 billion euros planned for 2022 (of which 2.8 billion in subsidies that will weigh on the public deficit), or even 550 million euros to finance the employment contract for young people.

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Consequence: if the decline in the public debt ratio for 2022 is “stronger than expected“, the debt is expected to increase from 115.3% in 2021 to 113.5% in 2022 (compared to 116% in the previous forecast)”however, this is not the result of a reduction in the public deficit, but of operations for the management of the state treasury “judge the HCFP.

However, he believes the deficit forecast for 2022 (5% of GDP) to be plausible, while the deficit forecast for 2021 could be “slightly lower“to the forecast of 8.1%, due to a”underestimation of income based on payroll“, thanks to a more favorable evolution of employment.

Growth in 2021 higher than the executive forecasts

In 2021, revenues could grow also thanks to an expected economic growth now well above the government forecast of 6.25%. This prediction “should be exceeded, given the results, much better than expected”, of the French economy in the third quarter, which grew by 3% “observes the HCFP.

The additional tax revenue that the state could then derive “it would go to the reduction of the deficit and debt“, The Minister of Economy, Bruno Le Maire, assured the National Assembly on Tuesday evening.

On Wednesday he specified, always in front of the deputies, to count on “From 3 to 5 billion euros“additional income from corporation tax, VAT and income tax”,based on the growth figure“in 2021.

(With AFP)