France posts 2.3 pct growth in 2004

11th February 2005, Comments 0 comments

PARIS, Feb 11 (AFP) - The French economy expanded by 2.3 percent last year, one of the best performances in the 12-nation eurozone, but Paris saw its three-year trade surplus turn into a deficit owing to the strong euro and surging imports.

PARIS, Feb 11 (AFP) - The French economy expanded by 2.3 percent last year, one of the best performances in the 12-nation eurozone, but Paris saw its three-year trade surplus turn into a deficit owing to the strong euro and surging imports.

Reporting the yearly growth figure, the national statistics institute Insee said gross domestic product grew by 0.7-0.8 percent in the fourth quarter. The figures exceeded expectations of 0.6 percent in the last three months and 2.1 percent for the year.

Analysts now foresee GDP momentum of 1.8 percent in 2005, well below the government forecast of 2.5 percent.

Friday's good growth news was tempered by a report from customs authorities that France last year had a trade deficit of EUR 7.765 billion (USD 10 billion), its worst performance since 1991.

The shortfall in the month of December alone came to EUR 1.892 billion.

The yearly deficit was attributed to a stronger euro, higher oil and steel prices and the weak presence of French companies in dynamic regions such as Asia.

Junior trade minister Francois Loos tried to put a positive spin on the results, telling France 2 television: "We have a deficit, but a dynamic deficit," reflecting robust domestic growth that boosts demand for imports.

But economists warned that the deficit had a negative impact on growth.

"One could say that if we hadn't had this negative contribution from foreign trade, we would have had growth of more than three percent and a true job-creating recovery in 2004," said Eric Heyer, a researcher at the OFCE economic research institute.

At the CCF bank, Nicolas Claquin estimated the effect of trade on GDP at 1.3 points.

He said the 2004 results are "worrisome in that they reflect the weak geographic and sectoral orientation of our exports, which have been unable to take advantage of global (economic) dynamism."

Marc Touati of Natexis Banques Populaires commented that French consumers, saddled with low purchasing power, "increasingly opt for cheaper goods, notably from abroad."

"The strength of French consumption is of but little help to enterprises working in France, which then are reluctant to hire and thus contribute to weakening purchasing power."

Under such circumstances, he warned, the French trade deficit could remain high in 2005.

On Tuesday, the French government stressed that strengthening middle class purchasing power and supporting businesses are two of its priorities between now and the next presidential election in 2007.

© AFP

Subject: French News

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