French fiscal watchdog sees smaller deficit than expected by government

PARIS (Reuters) - France's public sector budget deficit is likely to come in smaller than expected this year and any extra tax income should go towards reducing the public debt, the budget oversight panel said on Wednesday.

    The government is forecasting a budget deficit this year of 8.4% of gross domestic product, falling to 4.8% next year as the economy recovers from the coronavirus crisis and support measures are withdrawn.

    The High Council for Public Finances, an independent body mandated by law to judge whether the economic assumptions underpinning the government's budget are plausible, said the job market was recovering more strongly than forecast.

    "As a result of the extra income that would result, the 2021 public deficit could be less degraded than expected by the government," the body said in its judgment on the 2022 budget plan, which will be presented to the cabinet on Wednesday.

    "For 2022, (tax) income related to wages could also be underestimated," it said, adding that it was therefore not in a position to say whether the 2022 deficit forecast was plausible.

    With public debt expected to peak at 116% of GDP this year, the body said any extra income should be devoted to cutting debt to keep the public finances on a sustainable path.

(Reporting by Leigh Thomas; Editing by Richard Lough and Catherine Evans)

Copyright © Reuters 2008. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.

News, commentary and research reports are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.