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France to overshoot 3% budget deficit following protests


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France to overshoot 3% budget deficit following protests

France will overshoot EU budget rules in 2019, with its public deficit expected to breach the 3% limit, according to the French central bank.

In its quarterly economic update, the central bank said the 2019 budget deficit would climb to 3.2% in 2019 up from an estimated 2.6% in 2018 after France's President Emmanuel Macron announced a series of measures designed to appease the country's "gilets jaunes" or "yellow vests" movement.

The measures, which included a €100 a month rise in the minimum wage, cost public finances €9 billion, the update said. A planned move to transform a business tax credit into a permanent cut in employers' social security contributions will also have an impact on the deficit. Without this, the deficit would have been 2.3% in 2019, it said.

However, the central bank added it expected the deficit to fall "significantly" up to 2021, helped by sustained economic growth.

Growth is forecast at between 1.4% and 1.5% between 2019 and 2021, slightly lower than its December forecast of 1.5%.

The central bank said economic activity had shown signs of improvement after slowing due to the yellow vest movement at the end of 2018, buoyed by gains in purchasing power, up 2% per inhabitant.

It also noted that a decline in global growth would weigh until the end of the first half, but that growth should get a boost from an improved international outlook and a steadier export market.