*
French debt to fall from 111.6% of GDP in 2022 to 109.6%
in 2023
*
Debt burden seen falling further to reach 108.3% by 2027
*
Debt interest costs to become single biggest budget item
(Adds details)
By Leigh Thomas
PARIS, April 20 (Reuters) - France will see its national
debt burden fall faster than previously expected even though the
cost of interest payments is set to soar, Finance Minister Bruno
Le Maire said on Thursday.
The national debt burden, which reached a record just shy of
3 trillion euros at the end of last year, is expected to ease
from 111.6% of economic output in 2022 to 108.3% by 2027, Le
Maire. It had been previously been expected to hover around 111%
over the period.
"We want to accelerate France's debt reduction," Le Maire
told journalists.
Economists say that it is natural for 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.
Le Maire said, however, that the faster pace of debt
reduction was due to plans to rein in spending and 30 billion
euros in savings from the planned end of exceptional measures to
ease the cost of high energy prices.
"It's not the inflation that reduces the debt, it's our
spending cut decisions that reduce the debt," Le Maire told
journalists.
With the interest rate on France's benchmark 10-year bond
seen above 3% in the coming years, Le Maire said that the cost
of servicing France's debt burden would top 70 billion euros by
2027, making it the state's biggest budget item.
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. The ministry said it expected the fiscal shortfall to widen slightly this year to 4.9% of economic output from 4.7% last year, when the state coffers benefited from exceptionally strong tax income. Le Maire said a push to rein in spending growth, which included plans for each ministry to reduce spending by 5%, would reduce the deficit to below an EU limit of 3% by 2027. The ministry maintained its 2023 economic growth forecast of 1%, even though other institutions from the International Monetary Fund to the central bank have 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. (Reporting by Leigh Thomas Editing by Ingrid Melander and Christina Fincher)
