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Hélène Baudchon, Research Analyst at BNP Paribas, explains that faced with slower than expected growth, the French government has raised its fiscal deficit forecasts for 2018 and 2019.

Key Quotes

“It is now looking for a deficit of 2.6% of GDP in 2018 and 2.8% in 2019 (up from 2.3% and 2.4%, respectively, in the April 2018 Stability programme).”

“The wider 2019 deficit can be attributed to the transformation of the CICE tax credit into reduced employers’ contributions, which has a fiscal cost of about 1 point of GDP.”

“It masks an improvement in the structural deficit, estimated at about 0.3 points, thanks to efforts to reduce spending.”