In response to rising global uncertainties due to conflicts in Ukraine and Gaza, coupled with economic slowdowns in crucial trading partners like Germany and China, France has reduced its 2024 GDP growth forecast to 1 per cent, lower than the initially anticipated 1.4 per cent.
The Announcement
French Finance Minister Bruno Le Maire revealed the modification in an interview with TF1, emphasising the necessity to navigate through a shifting geopolitical landscape affecting economic prospects. The updated projection reveals worries about ongoing conflicts, interruptions in maritime transport, and sluggish economic performance in critical markets, necessitating strategic adjustments to fiscal measures.
The Action Plan
To deal with economic headwinds and sustain fiscal stability, the French government outlined action plans, including spending cuts totalling 10 billion euros across numerous departments and agencies. Minister Le Maire stressed that while there would be no tax increases or decreases in social security payments, all governmental entities would be mandated to contribute to the austerity measures.
The advised cuts incorporate reductions in operating expenses for ministries, adjustments in public policies, and budgetary trims for state operators. Added to this, Minister Le Maire confirmed that the government is looking to achieve its objective of reducing the 2024 state deficit to 4.4 per cent of GDP.
Future Plans
He pointed out the likelihood of introducing a supplementary budget in the summer, depending on economic conditions and political evolvements, to guarantee alignment with long-term fiscal objectives. The government aims to progressively narrow the fiscal shortfall in the approaching years, intending to fall below the EU-mandated ceiling of 3 per cent by 2027.
The downward modification in France’s growth forecast aligns with recent corrections made by renowned international bodies, including the European Commission, the OECD, and France’s statistics agency INSEE. The European Commission, in particular, cut its 2024 GDP growth outlook for France to 0.9 per cent, representing a decrease from the initially estimated 1.2 per cent in November, mentioning current economic challenges within the Eurozone. Similarly, the OECD decreased its growth forecast for France to 0.6 per cent, showing widespread worries over sluggish economic recovery.
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