- Higher GDP coming...
- … helps pushing down the public debt ratio…
- …which will nonetheless continue to rise
On 15 May, France will look richer. INSEE is to change its methodology and accounting basis when it publishes the quarterly national accounts. Among other changes, spending on research and development will be included in investment rather than intermediate consumption. The level of GDP (currently estimated at EUR 2,060bn in 2013) will be raised automatically as a result, by 2 to 3 percentage points (equivalent to EUR 40-EUR 60bn). The anticipated happy consequence for the government is that the public debt ratio should decline. Despite this, it will be hard for the trend to change. In 2013, the European Commission put the debt to GDP ratio at 94% and, according to its latest forecasts, this figure is expected to continue rising to 97% in 2015. If it takes time for the expected turning point to occur, this is because the primary balance (nominal budget balance before debt servicing) has not yet reached the level required to stabilise the ratio. In 2013, the French primary balance showed a deficit of nearly 2% of GDP. Yet, to stabilise the debt ratio at its 2013 level, for example, a primary surplus of about 0.5% of GDP would be needed in 2014, according to our estimates. Of course, it is not a question of achieving this in one year, but that gives an indication of the effort still needed to put in order French public finances.
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