What outlook for French public finances?

After exiting the excessive deficit procedure in 2018 , which the European Commission opened in 2009, France is likely to exceed the 3% deficit threshold again in 2019. Although this renewed breach is due to a one-off effect , it is nonetheless reigniting the debate on the state of French public finances. According to the government, public debt will reach 98.8% of GDP in 2019, a record, before gradually falling from 2020 onwards . For 2020, we believe the 2.2% deficit projection is not credible as it is based on a number of government expenditure reduction targets that have not been met already this year (reduction in the number of civil servants, elimination of tax loopholes). In addition, the fiscal target does not take into account new expenditures (social emergency measures, operating result of SNCF Réseau ). Given the mixed growth prospects for 2020 and 2021 ( we forecast GDP growth of 1.3% and 1.2%, respectively) and the slowdown in global trade, it seems unlikely that the deficit will fall by around one percentage point of GDP in one year. Our estimates show that the fiscal deficit will gradually decline to 2. 6 % of GDP in 2020 before reaching 2. 3 % in 2021. Public debt, meanwhile, is expected to reach a record level of 99. 5 % of GDP in 2020 before falling back to 9 8.9 % in 2021 . The medium-term outlook for the French debt dynamics remains unclear at this point as is still a significant gap between the trajectory of the budgetary balance and the so-called stabilizing budgetary balance (theoretical level of the budgetary balance which enables the public debt to be stabilized) . Thus, the decline in the debt ratio could only be temporary.