Growth lowered to 0.5% and deficit threatened: the government caught up with reality for the 2026 budget

This is what is called being caught up by reality. While the government had built its 2026 budget on the assumption of 1% annual growth, it gradually had to revise this figure downward as crises unfolded, until finally cutting it in half to 0.5%, with inflation at 2.1%. "Our guiding thread is transparency, the guarantee of credibility," declared Roland Lescure on Friday during the presentation of the executive's updated macroeconomic scenario.

The announcement confirms the prevailing skepticism, namely that economic conditions no longer allow hope of reaching the official deficit target for this year, set at 5% of GDP. Although Roland Lescure has not yet officially updated it—which will be done in the coming days—economists and parliamentarians specializing in financial matters expect another slippage in 2026, to 5.2% or 5.3% of GDP, above the 2025 level of 5.1%.

The day before, Insee sharply downgraded its growth forecast for 2026, lowering it from 0.7% to 0.4% following a very poor start to the year. The initial quarters were weighed down by oil prices, skyrocketing interest rates that increase the cost of public debt, and a scorching summer. In a vicious cycle, France's deplorable fiscal situation—over 150 billion euros in deficit and more than 3,500 billion euros in debt—prevented the government from deploying aid comparable to that of its neighbors to tackle soaring fuel prices and protect household purchasing power.

Looking ahead, the government is betting on a growth rebound in 2027 to 1%, with lower inflation at 1.8%. This expectation is nevertheless highly optimistic, as the economic environment remains clouded by uncertainty and next year is starting on a weak footing. Insee never issues forecasts beyond six months; however, it is already able to provide the growth overhang for 2027—the rate that would be achieved if activity remained frozen through the end of the year. That figure stands at 0.3%, a very weak launching pad. "It would take 0.3% growth every quarter to reach 1% for the year," estimates an economist and former Bercy official.

While the executive's macroeconomic scenario is always eagerly anticipated, it is because it forms the basis for pricing the upcoming year's budget: it allows for estimating revenue, expenditure, and the level of Gross Domestic Product to which the deficit will be compared. The credibility of the deficit target depends on the realism of this forecast—a highly political objective that always sits somewhere between the rigor of the numbers and the desire to reassure economic players.