Informations Rapides · 26 March 2024 · n° 74

In 2023, the public deficit reached 5.5 % of GDP, the public debt 110.6 % of GDP General government national accounts - first results - year 2023

The general government deficit for 2023 stands at €154.0bn, accounting for 5.5% of gross domestic product (GDP), after 4.8% in 2022 and 6.6% in 2021. Revenues slowed significantly in 2023, rising by 2.0% after +7.4% in 2022. The compulsory tax rate fell to 43.5% of GDP after 45.2% in 2022. Expenditure slowed slightly, and rose by 3.7% after +4.0% in 2022, to a level close to before Covid (43.9% in 2019). As a proportion of GDP, it kept decreasing, and reached 57.3% of GDP after 58.8% in 2022 and 59.6% in 2021, they however remain sensibly higher than before Covid (55.2% of GDP in 2019). General government debt in the Maastricht sense reached 110.6% of GDP at the end of 2023, after 111.9% at the end of 2022. It amounted 97.9 % of GDP in 2019.

In 2023, public administration expenses increased by 3.7%, in current euros after +4.0% in 2022 and +4.3% in 2021. This increase was lower than the price increase (+5.5% of GDP price), which explains the decrease of the expenditure/GDP ratio.

Operating expenditure accelerated again, rising by 6.0% after a 5.4% increase in 2022. Intermediate consumption accelerated sharply: +9.4% after +8.0%, once again driven by the increase in energy prices. Remuneration accelerated also: +4.6% after +4.4%, with the full-year effect of the July 2022 revaluation of the index point in the civil service, the July 2023 revaluation, and a more dynamic public employment than in previous years.

Social benefits accelerated, increasing by €22.5 bn, or +3.3% after a +1.2% rise in 2022. This increase is driven by the indexation of benefits to inflation, including the full-year effect of the (anticipated) indexation of July 2022. Thus, retirement expenses, which constitute the main component of social benefits, accelerated (+5.2%, or €18 bn), as did disability benefits (+€2 bn). Unemployment expenses rebounded with the increase in the number of compensatedjob seekers (+€1 bn). Benefits for family and childhood increased (+€2 bn) notably due to the indexation of the family support allowance and the increase in transfers to private nurseries. Health benefits were stable: the increase in drug consumption, healthcare professional fees and long term care was offset by a decline in testing and sick leave expenses, in the aftermath to the Omicron wave of Covid at the beginning of 2022. Finally, vocational training expenses decreased.

Subsidies and other transfers slowed to +0.3% in 2023 (+€0.6 bn) after +0.7% in 2022. The last aid to businesses related to Covid end (-€3.0bn with solidarity fund, aid for social contribution payments, youth employment aid). Expenses to support businesses and households facing high energy prices stabilized, with the non-renewal of the fuel rebate (-€7.6 bn) and the decrease in expenses for the gas tariff shield (-€2.5 bn), partially offset by an increase in subsidies for the electricity tariff shield (+€7.3 bn) and aid for energy bill payments to businesses (+€2.0 bn). Beyond just subsidies, the cost to public finances of the main mechanisms related to high energy prices increases by €3.3 billion in 2023. Conversely, apprenticeship expenses kept on increasing, as well with transfers to associations for child welfare, reintegration, and food aid. Finally, capital transfers declined after a the recapitalization of EDF in the first semester of 2022.

Interest expenses on debt decreased in 2023 (-€2.6 bn or -4.9%) and amounted to 1.8% of GDP, after having vigorously accelerated in 2022. This decrease is entirely driven by inflation-linked (mostly from the eurozone) bonds on the government's balance sheet (-€15 bn), partially offset by an increase in interest expenses on non-inflation-linked bonds and loans due to rising interest rates.

Net acquisitions of non-financial assets, mainly consisting of investments, increased: +6.0% after a +9.0% increase in 2022. Investment remained strong in local authorities, but government investment slowed down after a particularly dynamic 2022 with real estate investments.

In 2023, general government revenues were hampered by slowing economic activity, new measures on tax reduction, and a decline in received transfers. Overall, revenues increased by 2.0% in current euros, whereas GDP in value increased by 6.2%.

Taxes (before deduction of tax credits) were almost stable and increased by only 0.3% (+€2.8 bn) after +7.9% in 2022. VAT revenues slowed significantly to +2.8% after +7.6%, notably due to the slowdown in taxable consumption. Other taxes on product declined sharply again (-5.8% or -€6.9 bn) with the decline in real estate transaction registration fees (-€4.8 bn or -22.2%) accompanying the decline in real estate market, and with the new decrease in energy taxes with the tariff shield. Taxes on production slowed down (+€3.4 bn or +2.8% after +13.2% in 2022) with the slowdown in wage mass and a new step of abolition of the tax on business value added (-€3.7 bn), despite the dynamism of property tax (+€3.8 bn).

Current taxes on income and wealth declined slightly by 0.5% (-€1.9 bn) after +10.8% in 2022. Corporate income tax declined very sharply (-€10.7 bn) after an exceptional 2022 year marked by the dynamism of the 2021 profit. Personal income tax, whose scale has been indexed to inflation, increased slightly (+€0.8 bn or +0.9%). CSG/CRDS decelerated with payroll (+€6.6 bn or +4.4% after +9.4% in 2022). The final step of abolishing the housing tax on primary residences further reduces the tax revenue from this tax category (-€2.5 bn). Finally, capital taxes continued to increase strongly in 2023 (+€2.4 bn or +12.8%), driven by free transfers rights.

Actual social contributions slowed with wage mass, at +4.5% or +€17.8 bn after +6.1% in 2022.

Property income slowed but remained dynamic: +13.1% after +16.1% in 2022. Interest income increased with rising interest rates, while dividend income decreased.

Production revenues decelerated (+4.7% after +7.3%) after a 2022 year stimulated by reopening effects after the health crisis.

Finally, other revenues stagnated (+0.5% after +4.7%) with a decrease in transfers received under the European recovery and resiliency facility.

The state deficit increased by €6.9 billion. Excluding the effect of the €10 billion debt takeover by SNCF Réseau in 2022, it increased by €16.9 billion. Its revenues were penalized by new measures on tax reduction and the decline in corporate income tax. On the expenditure side, the end of Covid related expenditure and the decrease in interest expenses were not enough to offset the sharp slowdown in revenues.

The deficit of local public administrations increased by €8.9 bn, with a significant decline in real estate transaction registration fees allocated to municipalities and departments and an acceleration in operating and investment expenses.

Other Central Government Bodies (OCGB) had a deficit of €1.6 bn, representing a deterioration of €7.0 bn (excluding the effect of the SNCF Réseau debt takeover in 2022, which punctually improved the net lending of OCGB but worsened the State net borrowing for the same amount). This deterioration followed an increase in investment aid expenses under the “Programme d’Investissement d’Avenir” (PIA), a new rise in apprenticeship expenses, and a decrease in transfers received by Santé Publique France.

The net lending of social security funds (ASSO) increased again, by €4.7 bn, and stood at €12.9 bn, a surplus largely driven by that of Cades (+€18.0 bn). CSG and social security contributions slowed with wage mass, but remained more dynamic than expenses, whose growth fuelled by revaluations of social benefits linked to inflation was mitigated by the end of exceptional expenses related to the health crisis.

In 2023, the General government Maastricht debt (or consolidated gross debt in nominal value) increased by €147.6 bn and stood at €3,101.2 bn. Expressed as a percentage of GDP, the public debt decreased to 110.6% after 111.9% at the end of 2022 and 113.0% at the end of 2021. The general government net borrowing was mainly financed by an increase in its debt, but also by a decrease in its cash position (-€44.4 bn). Thus, net public debt increased more than gross debt, by €187.4 bn, and stood at 102.4% of GDP.

The increase in public debt in 2023 was mainly due to the increase in the contribution of the State (+€149.5 bn), which borrowed through short and long-term bonds (+€152.1 bn). In parallel, the State repayed long-term loans (-€1.6 bn) and deposits liability decreased (-€1.0 bn).

The contribution of local public administrations to public debt also increased (+€5.8 bn), mainly with long-term securities (+€5.1 bn). This was particularly the case for Île-de-France Mobilités and the Société des grands projets (formerly Société du Grand Paris, +€3.5 bn).

In contrast, the contribution of social security funds decreased (-€7.0 bn). Cades borrowed in short-term securities (+€9.0 bn), notably by assuming the debt of Urssaf Caisse Nationale (formerly ACOSS), whose bonds decreased by €13.0 bn. Overall, the outstanding debt in bonds decreased by €5.5 bn and the loans by €1.6 bn.

The debt of OCGB also decreased (-€0.7 bn). SNCF Réseau reduced its debt in securities (-€2.6 bn) while Action Logement Services issued bonds for €2.2 bn. In total, long-term securities decreased by €0.4 bn and short-term loans by €0.3 bn.