France Bets on 1% Growth for 2027 – But Its Own Watchdog Calls the Plan "Optimistic"
The government's 2027 budget rests on a doubling of growth from 0.5% to 1% and inflation falling below 2%. Economists at Natixis, the Banque de France, and the High Council of Public Finance are skeptical.
The French government has built its 2027 budget on a bet: that economic growth will double from 0.5% in 2026 to 1% next year, while inflation falls below 2%. It is an optimistic scenario, and the government's own fiscal watchdog has said so.
In an opinion published Thursday, the High Council of Public Finance judged the 1% growth forecast "optimistic," also highlighting the "significant uncertainty" surrounding the national context, particularly regarding "the very adoption of the budget for 2027." The government aims to bring the public deficit down to 5.0% of GDP in 2027, from 5.4% this year, through an effort of 54 billion euros.
To achieve this, the government is counting on a rebound driven by domestic demand. According to the budget documents, French growth in 2027 would be "mainly driven by domestic demand," with a normalization of agricultural production also contributing to the rebound. The government also expects inflation to return below 2%, to 1.8%, largely dependent on a return to normal in the Middle East, which has been the main cause of current inflation.
But the independent forecasts tell a different story. The Banque de France projects growth of 0.9% in 2027, rising to 1.2% only in 2028. Natixis forecasts just 0.8% for 2027. The OFCE and the economic research institute Rexecode both expect 0.7%. The European Commission, in its spring forecast, projected 1.1% for 2027, but that was based on an assumption of declining energy prices.
The gap matters because the budget arithmetic is tight. Hadrien Camatte, senior economist at Natixis, warned of a "risk of budgetary slippage in 2027," pointing to "a weaker economic growth, the high sensitivity of the debt burden to interest rates – a 100 basis point rise would entail an additional cost of 3.4 billion euros in 2027 – and the insufficiently documented nature of certain measures."
The debt burden is indeed growing. The government expects interest payments to reach 91.2 billion euros in 2027, up from 79.2 billion euros in 2026 – an increase of 12 billion euros in a single year. Public debt is projected to reach 121.7% of GDP in 2027, up from 119.3% in 2026.
The government's plan includes 43 billion euros in new measures, comprising 25 billion euros in savings and 18 billion euros in additional revenue. A partial freeze on pensions is expected to generate around 4 billion euros in savings, while family benefits would contribute 500 million euros. The point index for civil servants would remain frozen.
The budget also assumes that a budget will be adopted quickly. "The scenario assumes that a budget is adopted quickly, because a new period of political and budgetary uncertainty would directly weigh on activity," the government's documents state. With a presidential election approaching and no majority in the National Assembly, that is far from guaranteed.
For now, France is betting on a rebound that its own experts doubt will materialize. The deficit target of 5% depends on growth doubling. The debt burden is rising regardless. And the political calendar offers no comfort. The budget battle has only just begun.
Written by Thorben Thiede thorben.thiede@alpineweekly.com