PARIS (Reuters) – France’s stronger than expected economic recovery last year means the public sector budget deficit should come in better than planned, the budget minister said in an interview published on Sunday.
The government had built its budget planning on expectations for the economy to grow 6.25% last year, but the most recent indications are that the figure was probably around 6.7%.
“The strength of our growth translates into more tax revenue than expected and we spent less because companies drew less on emergency support,” Public Accounts Minister Oliver Dussopt told weekend newspaper Le Journal du Dimanche.
“All of the extra revenue is going entirely towards reducing the deficit even without sacrificing any measures to stimulate the economy or support purchasing power,” he added.
The government is ploughing 100 billion euros ($114 billion) into the economy, mostly in public investments, as part of a pandemic recovery plan and also had to roll out some emergency handouts for low-income households last year struggling with a surge in inflation.
Despite the stimulus spending and income support, the 2021 public deficit was now expected to come in at around 7% of economic output, he said. The government had previously put the deficit at 8.2%.
Against that backdrop, the Finance Ministry was comfortable with its forecast for the deficit to fall further this year to 5% and be back below the European Union’s deficit ceiling of 3% in 2027, Dussopt said.
The stronger than expected recovery means that the central state’s deficit was expected to be better than expected to the tune of 34.5 billion euros at 171 billion euros, he said.
($1 = 0.8761 euro)
(Reporting by Leigh Thomas; editing by Jonathan Oatis)