France 2014 Budget deficit below target

The French public deficit is expected to increase from 4.1% of GDP in 2013 to 4.2% in2014, according to Societe Generale. It is slightly better than expected by the government last summer (target 4.4% of GDP).

The improvement was half driven by higher-than-anticipated fiscal receipts and half driven bylower-than-expected social expenditures. As for public finances this year, spending freezeshave also been announced - but they may prove insufficient to meet the 2015 target (4.1% ofGDP). 

Indeed, inflation is set to be close to zero, whereas the budget bill was based on a stronger assumption (0.9%). As a result, tax receipts might disappoint while the impact of  spending freezes will be ineffective on the spending-to-GDP ratio. 

"Given the €8bn (0.4pp of GDP) tax cuts this year, we estimate that the public deficit should represent 4.3% of GDP in 2014 (higher than the 4.1% official target). Moreover, we fail to see for the moment how France will manage to meet the 2017 deficit objective (2.7% of GDP)", says Societe Generale.