France's Fiscal Plan: Again Set To Repair Slower Than Peers
In DBRS Morningstar's view, economic growth assumptions in the Republic of France's (AA (high) Stable) 2022-2027 Stability Programme are potentially out of reach, while fiscal targets are unambitious. Under France's medium-term plan - delayed due to elections - the deficit does not fall below 3% of GDP until 2027, and the government debt ratio stabilizes at a high level and does not revert to a downward path. France followed a similar pattern of comparatively slow fiscal consolidation after the financial crisis a decade ago. Most other Euro area countries are repairing fiscal imbalances much faster and returning debt ratios back to pre-crisis levels and trends. Slow budget repair does not affect France's strong debt profile, although it limits the country's spending space to address structural challenges or to accommodate another shock.Key Highlights
• France's public finances appear once again set to repair slower than peers.
• Government growth assumptions are potentially out of reach, while deficit targets are unambitious.
• Though government debt remains high, France's debt profile is strong.
“The relatively optimistic assumptions in the fiscal plan are in part tied to passage of key reforms. Those reform ambitions will likely be challenged by the new make-up of the legislature following the recent parliamentary election,” said Jason Graffam, Vice President of the Sovereign Group at DBRS Morningstar. “Underperformance of growth expectations would likely keep deficits in France higher for longer, while public balance sheets across Europe rebalance faster.”
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