Bercy announces 2014 growth and budget forecasts

**Minister of the Economy Pierre Moscovici and Budget Minister Bernard Cazeneuve will announce growth and deficit forecasts for 2013 and 2014 this Wednesday, outlining the key components of next year’s budget proposal.**

During a press briefing scheduled for 11:30 AM titled “Growth Outlook and Orientations of the 2014 Finance Bill,” Bercy is set to unveil the figures that have been the subject of numerous rumors and leaks this summer.

These public announcements come exactly two weeks before the budget proposal is presented to the Council of Ministers on September 25.

Moscovici and Cazeneuve are expected to clarify the key pillars of the 2014 budget proposal. Indeed, conflicting statements have emerged over the past few weeks regarding revenue projections, particularly concerning the tax receipts the government intends to collect as part of the continued effort planned for next year to reduce France’s public deficit.

While they had previously consistently cited figures of €6 billion in revenue and an additional €14 billion in public spending savings, Mr. Cazeneuve and Mr. Moscovici have both stated in recent days that “it would be much less than six billion,” without, however, calling into question the total scale of the effort (€20 billion).

Technically, Bercy must submit its growth and deficit forecasts to the High Council of Public Finances before Friday. The Council is then required to issue an advisory opinion regarding the credibility and relevance of these projections.

In April, when the government presented the stability program, the body did not hesitate to express reservations regarding the government’s optimism.

In this program presented in Brussels, Bercy announced a very slight gross domestic product (GDP) growth of 0.1% in 2013 and an improvement of 1.2% in 2014. Furthermore, it projected a public deficit of 3.7% of GDP at the end of 2013, falling to 2.9% in 2014.

Speculations

But this summer, things became blurred.

On July 31, Mr. Moscovici indeed acknowledged that the government’s goal was to achieve 0.8% growth in 2014, “then subsequently rise significantly above 1%, 1.5%, or even 2% in 2015 and 2016.”

One month later, President François Hollande had assured that “we will be able to slightly revise upward the growth forecast for 2014.”

While economists and observers were lost in speculation over whether the figure the President intended to re-evaluate would be 0.8% or 1.2%, Bercy hinted a few days later that the actual plan was to revise upward the 0.6% forecast established by the economic consensus.

Everything therefore suggests that the government’s new forecast will hover around 0.8%, but is unlikely to exceed that in the near term, despite emerging signs of recovery.

As for 2013, the positive news of a 0.5% rebound in activity during the second quarter, announced by Insee on August 14, provided a much-needed boost to most. “The 0.1% growth is a baseline; France, which was being promised a recession, is currently rebounding,” Mr. Moscovici stated on Tuesday, suggesting that growth could be even higher in 2013.

On the deficit side, however, the news is not good. Mr. Moscovici confirmed on Tuesday that it is set to exceed 3.7% of GDP this year. While he did not specify the exact amount, at the end of June, the Court of Auditors estimated it could fall between 3.8% and 4.1%.

Stagnating with zero growth, France has been granted a two-year extension by Brussels until the end of 2015 to bring its deficit below the 3% threshold. However, should the European Commission deem the 2014 efforts insufficient, it may be entitled to impose sanctions.

“France must maintain a maximum deficit of 3.6% for 2014. If it is ever estimated that the budget fails to meet this target and a notification is sent to Paris, things could take a turn for the worse,” a European community source asserted in late August, suggesting that the Commission’s right of intervention in national budgets had not yet been fully integrated in France.

“We run the risk of igniting a nuclear fire that no one will be able to contain,” the source added.