"I have decided not to continue with France's candidature for the World's Fair, which will be withdrawn," Philippe said in a letter to Pascal Lamy, the former World Trade Organisation boss who was heading the body set up to prepare for the fair.
There are "structural weaknesses" in the French proposal's economic projections, the prime minister said.
With the government making a priority of reducing France's budget deficit to the European Union's required three percent of GDP, the prime minister argued that he could not take the risk of endorsing further commitments.
In its bid, which was placed with the Bureau International des Expositions in September, France had named a site south of Paris but Philippe feared that it might not be ready on time.
Lack of private-sector interest
He also warned that the bid's forecast of 35-60 million visitors might prove unrealistic.
If the numbers are similar to 2015's fair in Milan, at about 20 million, income from tickets would not be the projected 1.3 billion euros but 455 million, with an inevitable knock-on effect on state expenditure.
Philippe is also concerned about the lack of private companies ready to join the operation, according to the Journal du Dimanche newspaper.
In a tweet the head of the committee piloting the French bid, Jean-Christophe Fromentin, attacked the decision as symptomatic of "that France which gives up, which withdraws or which bows out", while his deputy, Luc Cavounas, described it as "incomprehensible", given the France is hosting the Rugby World Cup in 2023 and the Olympics in 2024.
France's withdrawal means that three countries are still in the running - Russia, Japan and Azerbaijan.
The choice is to be announced on 15 November 2018 and the fair is to run from 1 May to 31 October 2025.