France's fiscal oversight body has warned that the economic assumptions underpinning the government's 2027 budget draft are "optimistic," posing risks to the plan for reducing the country's towering fiscal deficit.
The French government earlier on Thursday submitted a fiscal bill to the cabinet, projecting that economic growth will accelerate from 0.5% in 2026 to 1%, and planning to reduce the fiscal deficit as a share of gross domestic product (GDP) from 5.4% to 5%.
The High Council of Public Finances (HCFP), an independent body responsible for overseeing public finances, said these forecasts assume a significant rebound in private investment, but the surge in France's sovereign borrowing costs could pass through to the financing conditions of businesses and households.
The body also said that, due to the limited time and information provided by the government, it was unable to conduct an in-depth analysis of all the proposed tax and spending adjustments.
HCFP President Amélie de Montchalin said: "Overall, we believe the 2027 budget balance forecast faces risks on the one hand from the economic scenario, and on the other hand from uncertainty over the effects of the various measures."
Although the French government's forecast of 1% economic growth for 2027 is broadly in line with the median estimate of economists in Bloomberg's recent monthly survey, the Organisation for Economic Co-operation and Development (OECD) was more cautious last week, cutting its forecast to just 0.7%.
France is trying to restart efforts to repair its public finances, after this year's deficit reduction plan already went off track. With the government lacking a majority in parliament and a bond market selloff driving up financing costs, fiscal consolidation has become even more difficult.
The HCFP said next year's budget draft implies "significant fiscal adjustment," and that if all proposed measures are implemented, the spending forecasts "can be achieved."
However, the body warned that paying interest on France's rising debt burden will consume a considerable portion of the fiscal improvement.
Montchalin said that excluding debt servicing costs, the deficit in 2027 would fall to its lowest level since 2019; she also noted that a 5% deficit ratio is unprecedented in a period without severe economic stress.
She said: "We have a deficit that only appears in times of crisis, even though there is no crisis right now."
For 2026, the HCFP said the 5.4% deficit target is achievable, but the related forecasts still face "significant risks."
The HCFP said: "Given the worrying state of public finances, the government's goal of reducing the deficit in 2027 is the minimum necessary action."
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