“The growth forecast on which we will build this budget (2019) will be 1.7%,” said the French Prime Minister (PM) in an interview to the French newspaper Journal du Dimanche, even though the government had forecasted 1.9% thus far. Noting the economic slowdown that will affect the 2019 budget, the French PM nevertheless said he wanted to maintain the “pace” of reforms, announcing a drop in the inflation indexation of social benefits to counterbalance the decrease in growth and the increase in inflation. At the same time, he announced charge exemptions on overtime hours for employees.
The head of government conceded that “if growth slows down, there will inevitably be an impact” on the deficit. But the deficit should remain below the 3% threshold so dear to the European authorities. Three social benefits will be concerned: “Personalized housing assistance, family allowances, and retirement pensions will progress more moderately than inflation, by 0.3% per year in 2019 and 2020”. As a reminder, this is significantly less than inflation, which accelerated and rose in July to 2.3% on a year-over-year basis. Turning to the charge exemptions on overtime hours for employees, “this will represent on average more than EUR 200 extra per year” for “a person paid SMIC (French minimum wage)” and the measure will cost EUR 2 billion, according to the French PM.
Julien Moussavi, Head of Economic Research – Sources: Beyond Ratings, Journal du Dimanche