France's debt burden hits record in 2020 but comes in below government expectations

FILE PHOTO: A metro passes by the Bercy Finance Ministry in Paris, France, September 3, 2020. REUTERS/Charles Platiau

PARIS (Reuters) - France posted a record public sector deficit and debt last year, but these came in below expectations after the economy contracted by less than foreseen in the government’s budget planning, official data showed on Friday.

The country’s public deficit swelled to 9.2% of gross domestic product (GDP) -- the highest since 1949 -- from 3.1% in 2019, the INSEE official statistics agency said. But that was below government expectations for a 10.2% deficit.

Meanwhile, gross public debt rose to a record 115.7% of GDP last year from 97.6% in 2019, but was also below the 117.5% estimate in the government’s budget planning.

France’s debt spiralled higher last year as the government shelled out billions to support firms and workers during the worst of the coronavirus crisis.

“This protection allows us to guarantee a strong rebound in our economy once the health crisis is behind us,” Finance Minister Bruno Le Maire said in a statement.

“When economic activity has recovered, we will have to start reimbursing this debt with our strategy based of growth, controlling public spending and structural reform,” he added.

The lower-than-expected numbers come as little surprise given that France’s recession proved to be less severe than foreseen when the government’s budget planning was being carried out. INSEE said last month that the economy shrank 8.4% last year, less than the 10% contraction the government had based its budget planning on.

The government currently expects the deficit to narrow this year to 6.7% of GDP and the debt burden to widen to 116.2%. It is due to update its 2021 public finance forecasts in April.

Reporting by Leigh Thomas; Editing by Ana Nicolaci da Costa