(Results) A macroeconomic analysis of the 2020 Budget

During the conference “Evaluation of the 2020 Budget”, the CEPREMAP, co-organiser of the event with the Institute for Public Policy (PSE/GENES), presented its macroeconomic analysis of the 2020 forecasts, and detailed its macroeconomic projections for 2021–2022.

A revision of the growth forecasts for 2020

– The government has revised downwards its growth projections for 2020 from 1.7% to 1.3%, thus meeting the projections that Cepremap made in 2019 about the budget bill.

– Two contradictory effects explain this reduction: i) global demand for French products fell due to a slowing of global growth, and ii) the upward revision of the French deficit compensates for the negative external effect.

Macroeconomic projections for 2021-2022

– The government has tabled a return to global growth from 2021, leading to an increase in GDP of 1.4%, close to potential.

– Hypothesising from data about the global demand for French goods, and public revenue and expenditure, Cepremap estimated average growth at rates similar to government estimates.

– If the slowing of global growth were to continue, then the rate of French growth would drop below potential GDP, to a rate of about 1.1%.

– As a consequence, the GDP–debt ratio would increase, exceeding 100%, and increase the temptation to resort to a procyclical fiscal policy that aims to reduce public debt at a time when growth is declining.

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