Paris: France is facing increasing economic and financial pressures, amid a drop in economic growth forecasts and rising borrowing costs, at the same time as the government needs to take tough measures to reduce the budget deficit and secure financial resources.
Roland Lescure, the French Minister of Economy, announced today that the government has lowered its economic growth forecast for 2026 to 0.5%, compared to 0.7% previously, while expecting 1% growth in 2027.
During a press conference dedicated to updating the government's macroeconomic scenario, Lescure explained that inflation is expected to reach 2.1% this year, before falling to 1.8% in 2027.
He also acknowledged that the target to reduce the budget deficit to 5% of GDP this year is no longer an option, confirming that the deficit will exceed this percentage, and that the tight financial maneuvering space requires adopting the 2027 budget before the end of the year.
This is the third revision of France's 2026 growth forecast, after the government lowered its estimate from 1% to 0.9% in April.
Then to 0.7 percent in June, reaching 0.5 percent today, which is half since the beginning of the year. The National Institute of Statistics and Economic Studies (INSEE) had also lowered its forecast for French economic growth in 2026 to 0.4 percent, compared to 0.7 percent previously, warning of a slowdown compared to its European neighbors.
Meanwhile, Emmanuel Moulin, Governor of the Bank of France, confirmed that a proposal to cancel part of French debt would be illegal, dangerous, and unfeasible, contradicting European treaties, and could lead to inflation and higher interest rates without helping reduce the budget deficit.
Moulin warned that debt cancellation could lead to France leaving the eurozone and make it harder to borrow from markets, considering that canceling 500 billion euros of government debt would not provide financial leeway or reduce the deficit, as it would create, in his estimation, a gap of the same value in the budget of the Bank of France. Bond markets reflect growing pressure on French finances, with the ten-year bond yield reaching about 4.44 percent yesterday, Thursday, the highest level since 2008, compared to 3.50 percent for its German counterpart, while the gap between the two yields widened to about 0.94 percentage points, marking the highest level since 2012. Today, yields settled at 4.43 percent in France and 3.50 percent in Germany
