The government forecasts a GDP increase of 4% next year, after the 6.2% growth recorded in 2021. Enough to begin to reduce the public debt which has increased during the health crisis, without excess austerity so as not to break the economic recovery.
The last finance law of the five-year term has an inevitable scent of balance sheet and electoral message. The 2022 budget, which will be officially presented to the Council of Ministers on September 22, relies on a recovery in the economy after the health crisis, without wanting to reduce the deficits generated by “whatever the cost”. A roadmap as summarized by the Minister of the Economy, Bruno Le Maire: “We can combine a return to growth and consolidation of public finances.”
Avoid the mistake made in 2009
Growth should reach, according to forecasts from Bercy, 4% in 2022 after a little more than 6.2% this year, as confirmed on Tuesday the National Institute of Statistics and Economic Studies (Insee). GDP growth will be supported in particular by the recovery plan of 100 billion euros, of which 70 billion should be spent by the end of this year. The deficit in public accounts should be a little less bad than what was initially expected. It is estimated at 4.8% of gross domestic product instead of the expected 5.3%. Clearly, tax revenues are shaping up to be a little better. They will help close the gap with public spending.
However, the strategy of “whatever it costs”, which has just been disconnected, will continue to weigh on the accounts of the house France. Since 2020 and the start of the pandemic, the State has spent 35 billion euros for short-time working and another 35 billion for the solidarity fund intended to support businesses. Public debt, which reached just over 116% of GDP in 2021, will drop slightly to “fall” to 114%. The government obviously does not intend to repeat the mistake made in 2009 after the financial crisis. The desire to quickly reduce deficits had broken growth. In this election year, the government does not intend to reap new tax revenues in order to reduce the debt. It will even be quite the opposite, since 2022 will see the income tax rate drop from 26.5% to 25%, and the 20% of households that still pay housing tax will be exempt.
Double-edged Covid savings
This 2022 budget and the accompanying forecasts appear relatively credible to Eric Heyer, director of the studies and forecasts department of the French Economic Observatory (OFCE): “The growth rate of 4% in 2022 is credible if the additional savings stored by the French during the health crisis do not go towards consumption.” Since the start of 2020, around 142 billion euros have been set aside by households in France who could afford it, in addition to the woolen socks they build up during “normal” periods. A sum that raises all questions. If a few of these billions move towards consumption, growth could exceed 4% in 2022. On the other hand, if this savings spins into investment in stone, a speculative real estate bubble and inflation on rents will then be the appointment.
Source: Libération by www.liberation.fr.
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