France's fiscal consolidation will have to be very significant

France's fiscal deficit forecasts (public finance programme for the 2023-2027 period published in December 2023) were based on very optimistic growth assumptions: 1.4% in 2024, 1.7% in 2025 and 2026 and 1.8% in 2027. With this growth assumption, the fiscal deficit would be reduced from 4.9% of GDP in 2023 to 4.4% of GDP in 2024, 3.7% of GDP in 2025, 3.2% of GDP in 2026 and 2.7% of GDP in 2027. Public spending would increase on average by 0.6% in real terms from 202 3 to 2027. The difficulty lies in the assumption made for productivity gains. They are expected to rise from +0.1% in 2023 to +0.5% in 2024, +0.4% in 2025 and 2026, and +0.5% in 2027. Per capita productivity remained constant in 2023. The government's forecast includes continued strong growth in the employment rate (employment is expected to grow by 0.7% in 2024, and by 1.3% per year from 2025 to 2027). But if the employment rate grows rapidly, the proportion of unskilled workers in the workforce will continue to rise, which, together with the other causes of weak productivity gains, will probably lead to further stagnation in productivity. If labour productivity is stable from 2024 to 2027, instead of growing cumulatively by 1.8 percentage point, and even if the public spending growth assumption is met, the fiscal deficit will be 3.7% of GDP in 2027, not 2.7% of GDP.