France – 2021 Draft Finance Bill: Government deficit, 6.7% of GDP after 10.2% in 2020

  • Headline priorities
  • Record shock to the economy
  • Budget deficit at 10.2% of GDP
  • Deficit to remain a hefty 6.7% of GDP in 2021
  • Main new measures in 2021
  • Debt ratio soars
  • Comments


France's budget deficit ballooned in 2020 from 3% to 10.2% of GDP. The economy faltered and an immense emergency recovery plan added €65 billion to spending. The deficit will narrow again in 2021, but remain a high 6.7% of GDP. The emergency measures may not be extended, but the government has unveiled a mammoth €100 billion stimulus package for 2021-2022. This 2021 draft finance bill is helping to respond in the short term to the exceptional shock suffered by the French economy and to consolidate the recovery movement.

France – 2021 Draft Finance Bill: Government deficit, 6.7% of GDP after 10.2% in 2020

The 2020 emergency measures and the 2021 stimulus package will cushion the effects of the pandemic and lockdown, kick-start the economy from Q3 2020, tackle a number of structural weaknesses and lead to more sustained and sustainable growth. The offi-cial projection underlying the budget as-sumptions is for GDP to pick up 8% in 2021, in the wake of a 10% fall in 2020. But the uncertainty clouding the prospects for both public health and the economy is not going away. We also think the fiscal multiplier used in the estimates (0.8) and forecast business investment spending (+15% by volume in 2021) are on the opti-mistic side. Despite incentives to decarbonise and to promote the development of green technologies, we expect a more prudent approach to investment and for spending to be spread over a longer period of time. What's more, we cannot rule out the spectre of a further rise in cases leading to new restrictions and new emergency measures.

Olivier ELUERE, Economist