France Establishes Five-Year Deficit Reduction Plan... Limits Spending Growth Rate to 0.6%

[Asia Economy Reporter Kim Hyunjung] France has established a five-year plan to reduce its fiscal deficit, including limiting the annual expenditure growth rate to 0.6%.

According to Bloomberg on the 21st (local time), Bruno Le Maire, France's Minister of Finance, announced this five-year plan. Despite the difficult economic situation and geopolitical uncertainties regarding energy and trade in the coming months, he stated that the annual growth rate would be raised to 1.8% by 2027, and the unemployment rate would improve to 5%.

The plan aims to limit the annual expenditure growth rate to 0.6%, the lowest in 20 years, with the goal of reducing the fiscal deficit to below 3% of the Gross Domestic Product (GDP) by 2027, when President Macron's second term ends.

He explained, "This stabilization program is based on French growth that will proceed faster than public spending," adding, "This is why it sends a serious political message about public finances."

However, the strategy to restore France's finances, which surged during the COVID-19 pandemic, is expected to face considerable challenges. It remains unclear whether President Macron, who lost the majority in parliament earlier, can gain support for pension reform and unemployment benefits, which are expected to boost economic activity enough to lower unemployment and improve public finances. In fact, the inheritance tax cuts promised by President Macron during the election campaign are currently deprioritized in favor of corporate tax cuts.

In particular, President Macron's stabilization program was criticized as "overly optimistic" even when he held a parliamentary majority. On this day, the French Economic Observatory (OFCE) stated that Macron would not achieve the deficit target, and the unemployment rate would not decrease over the next two years but rather increase, reaching 7.5% in 2027.

This content was produced with the assistance of AI translation services.