France Expects Bigger Budget Gap Amid Tax Cuts, Global Weakness

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The French government boosted its budget-deficit forecast Friday, amid global economic headwinds and a drag on finances from President Emmanuel Macron’s stimulus in response to the Yellow Vest protests.

The finance ministry cut the 2020 growth forecast to 1.3% from 1.4% previously and raised its budget deficit target to 2.2% of economic output from the 2.1% aim it set in June. The full details of next year’s budget will be published at the end of September.

The gloomier economic and financial outlook for the euro area’s second-largest economy is the latest sign of global trade difficulties permeating the currency bloc. Still, France is seeing less of an impact than Germany, which is more exposed to export markets and has warned of a gloomier growth outlook.

France’s economy is also getting support from Macron’s efforts to stimulate demand with tax cuts for households after the Yellow Vest demonstrations, but that will come with a cost for public finances. The latest measures Macron unveiled in the spring -- in addition to measures he took at the end of 2018 -- will cost around 6.5 billion euros ($7.2 billion) in 2020.

To contact the reporter on this story: William Horobin in Paris at whorobin@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Scott Lanman

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