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French 2019 budget deficit to rise, but respect EU limit - officials

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By Reuters

PARIS (Reuters) – France’s budget deficit will rise next year but stay below the European Union’s limit of 3 percent of economic output, according to figures given by Finance Ministry officials on Tuesday.

Next year’s budget, which is due to be published at the end of this month, foresees the public deficit rising to 2.8 percent of gross domestic product next year after 2.6 percent this year, the ministry officials said.

Respecting the EU deficit limit is the cornerstone of President Emmanuel Macron’s pro-European agenda after France flaunted the rules for a decade before his presidency.

Most of the increase in the deficit next year is due to a long-expected, one-off effect of government plans to transform a payroll tax credit scheme into a permanent tax cut.

The combined impact of the last rebate under the scheme for this year and the tax cut next year amounts to a tax break of more than 20 billion euros ($23.2 billion) for companies in 2019.

The overall deficit will remain lower than forecast in this year’s budget, which was based on projections for a shortfall of 2.8 percent in 2018 and 2.9 in 2019.

The Finance Ministry forecasts that the economy will grow by 1.7 percent in both 2018 and 2019, unchanged from the estimates in this year’s budget.

Meanwhile, public debt is expected to peak this year at 98.7 percent of GDP before easing to 98.6 percent in 2019 and gradually fall to 92.7 percent by the end of Macron’s presidency in 2022.

The following are the main economic and financial figures in the 2018 budget to be published on Sept. 24.

(Reporting by Leigh Thomas and Yann Le Guernigou; Editing by Gareth Jones)