PARIS, April 20 (Reuters) - France will see the national
debt burden fall faster than previously expected even though the
cost of interest payments is set to soar, the finance ministry
said on Thursday.
The ministry also said that it expected the fiscal shortfall
to widen slightly this year to 4.9% of economic output from 4.7%
last year, but still expected to cut it to less than an EU limit
of 3% by 2027.
Meanwhile, the national debt burden, which reached a record
just shy of 3 trillion euros at the end of last year, was
expected to fall from 111.6% of economic output last year to
109.6% this year.
It was then seen gradually easing afterwards to stand at
108.3% by 2027 whereas the ministry had previously forecast it
would hover around 111% of economic output between now and 2027.
Economists say that it is natural for currently high
inflation to reduce debt as a share of nominal gross domestic
product because it boosts the prices used to calculate GDP,
automatically lowering the ratio.
The ministry updated its long-term forecasts as part of its
annual financial stability programme that euro zone countries
send to their EU partners to show that they are not letting
dangerous budget problems build up.
It maintained its 2023 economic growth forecast of 1%, even
though other institutions from the International Monetary Fund
to the central bank have all pencilled in lower estimates.
The ministry also stuck to a forecast that inflation would
fall from 4.9% this year to the European Central Bank's 2%
target by 2025.
With the interest rate on France's benchmark 10-year bond
seen averaging 3.2% this year and 3.4% afterwards, the ministry
forecast that the cost servicing the debt burden would surge
from 41 billion euros this year to more than 71 billion in 2027.
(Reporting by Leigh Thomas
Editing by Ingrid Melander)
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