26 March 2019

2019- n° 72

In 2018, the public deficit reached 2.5% of GDP, the notified debt 98.4% of GDP General government national accounts - first results - year 2018

In 2018, public deficit reached −€59.6 bn, accounting for −2.5% of GDP after −2,8% of GDP in 2017. As a share of GDP, revenues decreased from 53.6% to 53.5%. Expenditure went down from 56.4% to 56.0%. The compulsory levies ratio decreased by 0.2 point at 45.0% of GDP.

Total expenditure rose by 1,9% after +2,3 % in 2017. Excluding tax credit, total expenditure decelerated more (+1,3 % in 2018 after 2,4 % in 2017). Operating expenditures increased by 1,4% in 2018 after 2,6% in 2017. Intermediate consumption and wage compensation decelerated (respectively +1,9% and +1,1% after +3,3% and +2,4% in 2017). The interest charges increased slightly, +0,4 % after a decrease in 2017 (−3.8 %).

Social benefits rose by +1,8% after +1.7% in 2017. The acceleration of benefits in cash (+2.0% after +1,5%) was driven by pensions expenditure. Conversely, social benefits in kindsdecelerated by +1,1% after +2,7% in 2017 due to the decrease of housing social benefits.

Other transfers and subsidies decelerated : +3,1% after +5,9% in 2017. This is due to the impact of the capital injection into Areva SA in 2017(-€4,5 bn) and the lower refund of the 3% tax on dividends for -€1,0 bn (+€3,7 bn in 2018 after +€4,7 bn in 2017). Conversely, subsidies increased mainly because of the grwoning wieght of tax credits : €+3,8 bn tax credit for competitiveness and Employment(crédit d’impôt pour la compétitivité et l’emploi, CICE), +€2,7 bn related to tax credit for the employment of a home-worker which have been extended to inactives (part of this expentidure, € 1,6 bn, was recorded in decrease in income tax in 2017 ) and +€0,6 bn related to the creation of a tax credit on payroll tax for non-profit sector. Those increases have been partly offset by a decrease of State-funded contracts and subsidies for employment in small and medium-sized firms. Finally, the contribution to the European Union budget went up by €4.3 bn in line with the increase of the EU budget.

Net acquisition of non-financial assets – fixed assets, stocks and lands as well as intangible non produced assets – accelerated by 3,5% in 2018 (+€2.8 bn) after a rise of 1,9 % in 2017. The increase comes mainly from the local government investment (+€3,6 bn). The investment of the State Government is stable.

Overall revenues increased by 2,3 % after +3,8 % in 2017. Taxes on income and wealth increased by 6,2% after +5,1% in 2017. The contribution sociale généralisée (CSG) rose by +€25,8 bn due the the increase of its rate by 1,7 point decided from January 1, 2018. Personal income tax increased by €2,6 bn, despite the introduction of a flat-rate tax on on capital income which were dynamic in 2018 (« prélèvement forfaitaire unique »). Conversely, corporate income tax decreased by €3,2 bn partly as a result of the exceptional and additional contributions to the tax in 2017, as welle as the drecrease of the tax rate in 2018. . Finally, other current taxes decreased by €5,8 bn due to the ending of the impôt de solidarité sur la fortune (solidarity tax on wealth)partially offset by the creation of the impôt sur la fortune immobilière (tax on real estate-assets). And the taxe d’habitation (housing tax) decreased by €2,4 bn due to the phasing-out of this tax.

Taxes on products and production increased by 4.3% after +4,6% in 2017. VAT increased by €7.0 bn after +€.7.4 bn in 2017. Taxes on domestic consumption of energy products (fuels, electricity and natural gas) overall rose by €2.6 bn due in part to the increase of carbon component. The droits de mutation à titre onéreux (tax on real estate transactions) increased by +€0,8 bn and the taxe foncière sur les propriétés bâties (land tax) by +€1.0 bn. Finally, taxes on tobacco increased by +€0,9 bn.

Social contributions went down by -1,7 % (after +3,2%) as a result of the to the reduction of employees contribution rates of (health and unemployment contribution) : employees contributions decreased by 10.0 % (after +3.4%) and employers contribution decelerated by 2.5% after +3.1%.

The reduction in general government net borrowing in 2018comes mainly from social security funds (€5.4 bn) related to more dynamic revenue than expenditure. Central agencies net borrowing decreased by about €1,7 bn : expenditure decreased by €2.7 bn, of which €2.5 bn of allocations de solidarité spécifique (specific solidarity grant to unemployed people who reach the end of their benefits), financed by the State Government from 2018, previously financed by a central agencie bodies called « fond de solidarité » .

To a lesser extent, the net lending of local government increased by €0.7 bn becuause of more dynamic revenue than expenditure. The operative expenditure decelerated, in particular wage compensation. The transfers from State government to regions (€-3,9 bn) is broadly offset by the increase in taxes. Finally, only the State deficit increased by €3,8 bn due to expenditure more dynamic than revenue, mainly due to the increase in subsidies for tax credits and the rise of the contribution of to the European Union budget.

At the end of 2018, the Maastricht debt accounted for €2,315.3 bn, a €56.6 bn year-on-year growth after a €70.2 bn increase in 2017. Maastricht debt is the gross consolidated debt of the general government, measured at nominal value. It reached 98.4% of GDP at the end of 2018 as in 2017. The net public debt was also stable, it stands at 89.5% of GDP in 2018 as in 2017.

The State contribution to debt rose by €73.5 bn, a variation higher than its net borrowing (€69.9 bn), explained by an increase in cash flows and despite a high level of premiums. The contribution of central agencies (central government units other than the State) increased by €0.3 bn, of which €2.2 bn due to the increase of the debt of SNCF Reseau in part offset by the decrease of CNA ‘s debt, by €2.1 bn (Caisse nationale des autoroutes).

Local government debt reached €205.6 bn at the end of 2018 compared to € 201.2 bn at the end of 2017, an increase by €4.4 bn. The Société du Grand Paris has a debt of €2.9 bn.

The social security funds contribution to debt decreased sharply by €21.6 bn to stand at €204.0 bn at the end of 2019 due to Cades and Acoss which debt decreased respectively by €17.9 bn and €5.3 bn.