Macron's Hopes of Economic Revival Fade as 2024 Outlook Downgraded

France's frail economy is still haunted a gloomy economic outlook, while its neighbor Germany languishes in recession and geopolitical tensions continue.

The French Finance Minister Bruno Le Maire has cut the country's 2024 economic growth forecast to one percent, eyeing €10 billion in spending cuts.

The minister declared that the Macron-led government will cut spending across all ministries and some programs to compensate for falling productivity and meet obligations to lower France’s 2024 budget deficit by 4.4 percent.

“The principle of responsibility is to act at the right moment with rigor but without brutality to keep control of our public finances, deficits, and debts,” Le Maire claimed in an interview with TF1 TV on Sunday.

Europe’s prolonged stagnation has pressured President Emmanuel Macron to try to aid his country’s economic sustainability and revive its deficit-plagued public finances after the national bank cut back economic growth projections.

Macron faces significant obstacles as France's economic prospects worsen. He attempted to improve France’s finances without resorting to austerity or tax increases, hoping that deeply-unpopular labour reforms would help economic growth.

“I am committed to not increasing taxes…We have cut them and won’t deviate from this line. French people can’t bear any more tax,” the finance minister said.

Macron's pledghes were questioned as spending surged amid the COVID-19 pandemic and the energy crisis stemming from the Ukrainian conflict.

In December 2023, S&P Global Ratings took a negative view of France's credit rating, warning of the potential for a downgrade this year based on government spending and economic performance.

Rising unemployment in 2023 adds pressure to Macron's economic strategy, while companies in the finance and construction industries anticipate more job losses.

The French government has already made €16 billion in cuts in its bid to decrease its deficit from 2023’s 4.9 percent to 4.4 percent of economic output this year.

“It’s still positive growth, but it takes into account the new geopolitical context,” Le Maire insisted in reference to the conflicts in the Middle East and Ukraine and Germany’s economic recession.

Under Macron, France's public debt climbed from €1 trillion in 2003 to €3 trillion in 2023, and debt servicing costs have spiked due to recent inflation. About 10 percent of French government bonds are tied to inflation, increasing its payment obligations, compounded by rising interest rates set by the European Central Bank.

Macron faces a dilemma of unpopular choices, including another rise in diesel tax which triggered the 2018 "yellow vests" protests highlighting economic inequality. His efforts to reform the country's public administration and the recent protests by farmers have wrung €400mn in concessions from the treasury.

Sanctions on Russia over the Ukraine conflict have sent energy prices and general inflation soaring. But the government has raised the military budget by 40 percent to €413 billion for 2024 to 2030 when compared to the previous 7-year cycle. It also pledged another €3 billion in support for the war in Ukraine on Friday.