France Halves Growth Forecast, Admits Deficit Exceeds 5 Percent

France cuts its 2026 growth projection to 0.5 percent. The government confirms the public deficit will finish above 5 percent of gross domestic product. Economy minister Roland Lescure made these statements on September 11. This marks the third downward revision for the year. The initial forecast stood at 1 percent. It was lowered to 0.9 percent in April and 0.7 percent in July.

The National Institute of Statistics and Economic Studies estimated growth at 0.4 percent on September 10. They identified France as the only large advanced economy expected to slow this year. Lescure cited higher energy prices following the Strait of Hormuz crisis. Weaker investment and summer drought also reduced GDP by 0.1 point. Inflation is expected to hit 2.1 percent in 2026 and 1.8 percent in 2027.

Deficit targets abandoned for 2026

The original 2026 budget aimed for a 4.7 percent deficit. This target shifted to 5 percent after the 2025 figure reached 5.1 percent. Lescure stated that 5 percent is no longer an option. Public accounts minister David Amiel announced the cancellation of 500 million euros in spending. Additional cuts are required across government ministries.

Savings will fund a 1 billion euro emergency plan for farmers. The agricultural sector suffered from heatwaves and drought. Amiel noted that no further spending fat remains in the budget. A 2027 budget must be passed before the end of this year. Lescure expects growth to return to 1 percent in 2027. This assumes shipping through the Strait of Hormuz normalizes.

Public debt exceeds 3.5 trillion euros

French public debt stands above 3.5 trillion euros. This equals roughly 117 percent of GDP. Unemployment rose to 8.3 percent in the second quarter. This is the highest level since 2020. The national statistics institute projects unemployment at 8.6 percent by year-end. A recent poll shows 66 percent of citizens view the economic record negatively.

Bank of France governor Emmanuel Moulin criticized a proposal to cancel central bank debt holdings. He called the plan illegal and dangerous. The proposal would write off approximately 500 billion euros. Moulin warned this would breach European Union treaties. He described the move as equivalent to a sovereign default. France has not defaulted since 1797.

Political pressure rises on fiscal policy

The draft 2027 budget is due before the National Assembly on September 30. Opposition figures are proposing aggressive debt cancellation measures. Confidence in the presidency dropped to 20 percent. This represents a four-point decline. The government faces intense scrutiny over its fiscal management. Source GN auto markets/bonds: sovereign debt reports these developments.