June 30, 2019 / 1:49 PM / 22 days ago

Frances nudges up 2020 deficit forecast to 2.1%

PARIS (Reuters) - France expects its public sector deficit to reach 2.1% of economic output next year, up from the 2.0% forecast prior to tax cuts promised in response to the “yellow vest” protest movement, a government budget projection showed on Sunday.

President Emmanuel Macron announced plans at the end of April to reduce income tax by 5 billion euros ($5.7 billion) as part of measures to defuse months of protests over issues such as fuel levies, weak purchasing power and perceptions that Macron’s administration was arrogant.

Budget Minister Gerard Darmanin said last week the government was still aiming for a deficit of about 2% next year and had identified savings to offset the upcoming tax cuts.

But France’s public audit office has said the government is in danger of missing its fiscal targets unless it makes spending cuts.

Macron’s pledge to reduce the income tax burden by 5 billion euros came on top of a 10 billion-euro package of social measures unveiled in December at the height of the “yellow vest” unrest.

The updated public finance forecasts, posted on a government website, also slightly increased the deficit projections for 2021, to 1.7% from 1.6%, and for 2022, to 1.3% from 1.2.%.

The government maintained its previous forecast of 3.1% for the 2019 deficit, a temporary spike linked to a change in corporate taxation.

Reporting by Myriam Rivet, writing by Gus Trompiz

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