EUROPEAN FISCAL: French Budget Deficit Widens In Line With Seasonal Norms In Jul

 The French YTD general government budget deficit widened in July, but this dynamic is in line with seasonal norms. The YTD deficit stood at E156.9bln in July 2024 (vs E103.5bln in June). 

• The YTD deficit was lower than the July 2023 outturn of E169.0bln, primarily due to a E7.5bln EU Recovery and Resilience Plan payment in July ’24. However, it has still grown at a much faster rate than in 2018/2019.
• In Q1, the 4Q rolling sum of the general government budget deficit was 5.5% of GDP.
• Although monthly tracking suggests that the budget deficit grew slightly less in Q2 than in Q1, this may be offset by lower nominal GDP growth of 0.4% Q/Q (vs 0.7% in Q1).
• Reuters reported this morning that the deficit is at risk of reaching 5.6% of GDP this year due to a shortfall of tax revenue. This would exceed current analyst estimates of 5.2%, and the EC’s 5.3% projection.
• All forecasts remain comfortably above the EC’s 3% medium-term debt/GDP threshold.
• Ongoing fiscal concerns are heightened by the ongoing period of political paralysis, with the pathway to forming a Government still unclear at this stage (see: “FRANCE: Macron Continues Talks w/Political Leaders As PM Attention Shifts Right”, Sep 3).