The High Council of Public Finances (HCFP) deemed the government’s updated economic scenario, taking into account the conflict in the Middle East, as “coherent” on Wednesday, while warning of strong uncertainties and a lack of clarity regarding the impact on the public deficit this year.
Earlier this month, the government lowered its growth forecast for 2026 to 0.9%, down from the previous 1% expectation, and raised its inflation forecast to 1.9%, up from the earlier 1.3% anticipation.
To establish these forecasts, it assumed a scenario of gradual easing, leading to maintaining oil prices at $100 until the end of May before falling to $80 by the end of 2026.
“Under this hypothesis of gradual normalization in the second half, the High Council believes that the government’s updated economic scenario for 2026 is coherent,” it stated in a report.
However, this scenario “remains subject to a major risk related to the evolution of the international environment,” added the HCFP.
Despite the economic slowdown, the government has maintained its objective of reducing the public deficit to 5% of gross domestic product (GDP). To achieve this goal, it announced on Tuesday that six billion euros of expenses could be stopped this year, including four billion euros for the state and two billion euros “in the social sphere.”
“For the state, these would be regulatory measures used in 2025, with the measures planned for the social sphere remaining unspecified. The impact of these measures on national accounting expenditure and ultimately on the public deficit has also not been clarified,” noted the HCFP.
And it cautioned: to meet the deficit target, an “effective implementation” of the announced savings measures will be necessary and “the absence of non-financed discretionary measures in response to the crisis.”
For now, the government has ruled out any generalized measures, such as a fuel tax cut, opting instead for targeted support measures for sectors most affected by rising energy prices.
(Authored by Blandine Hénault, edited by Zhifan Liu)
