Growth: French government forced to reconsider its downward ambitions

After the first part of the year, the French government is forced to revise downward its growth forecasts for 2018, without setting new targets or tracks for the time being. budget savings.

"We will revise the growth forecasts for 2018" which were 2%, admitted Tuesday Finance Minister Bruno Le Maire, interviewed on BFM TV / RMC, after the publication Friday "disappointing" figures "INSEE for the second quarter with a rise of barely 0.2% which has confirmed the deceleration of the French economy since the beginning of the year.

The Minister has not given so far new forecast for growth. "It will be announced at the start of the budget presentation," said his entourage to AFP.

"The government had no choice, it was obliged to revise downward growth forecasts" Philippe Natrix, an economist at Natixis AM, expects a rise of only 1.5% this year.

Christopher Dembik, head of economic research at Saxo Bank, is slightly more optimistic, with a forecast in the range of 1.6 to 1.7%, also convinced that the government's goal was "far too ambitious, impossible to hold."

The deceleration in the first half of 2018 comes after a 2017 year that had grown robustly by 2.2% (2.3% in data corrected for working days), well above expectations.

It is mainly due to consumption led by the rise in oil prices, which is eroding the purchasing power of the French, as well as taxation with the rise of the CSG and gas taxes at the beginning of the year, have economists estimate.

The first reduction of the housing tax, with a view to its abolition by 2022 for 80% of French people, as well as the second phase of the abolition of employee contributions in October could boost consumption. Even though the decline in contributions will come late to give a decisive impetus to growth in 2018.

– What savings? –

The sharp acceleration of inflation in July, up 2.3% more than the previous month (+ 2% in June), supported by rising energy prices, could, however, complicate a little more the goal of the government.

"It's not good, there will be a loss of purchasing power," Waechter said, questioning the government's ability to meet its commitment to Brussels to reduce the public deficit this year to 2.3%.

"What will the government do to achieve this?" Savings on spending or will it increase the tax? In any case, it will have effects on demand in the short term and could be penalizing for the growth. "

For now, the government, which has budgeted 2018 on the basis of 1.7% growth, has not yet announced its intentions.

For Mr. Dembik, the measures could result in "cuts in the budgets of some ministries, or even a further decline in endowments to communities." "The budget choices will certainly be very complicated," he warned.

In the meantime, Le Mayor calls for "the transformation of the country's economy to continue." Nothing should distract us from our efforts to accelerate growth, it is important not to let the pace of reforms go down, "he said.

"Growth and the economy, it is the long time", he underlined, to explain the coup de mou of the growth on the first part of the year and the rise of the unemployment in the second quarter. "We must stay the course, be able to continue the transformation to the end.That's how we will have results," badured the minister.

According to INSEE, the "growth acquis" for the current year – that is to say the level that GDP would reach if activity stagnated by the end of the year – is 1.3%. The public body forecasts 1.7% growth for the whole year. The Banque de France, which is more optimistic at 1.8%, expects a marked acceleration in the second half of the year.