France 'set for at least 2.2 pct growth in 2004'

12th August 2004, Comments 0 comments

PARIS, Aug 12 (AFP) - The French economy is on course for growth of at least 2.2 percent this year, official data showed on Thursday, offering relief to the government harassed over budget deficits and boosting the outlook for the eurozone.

PARIS, Aug 12 (AFP) - The French economy is on course for growth of at least 2.2 percent this year, official data showed on Thursday, offering relief to the government harassed over budget deficits and boosting the outlook for the eurozone.  

The data coincided with firm growth figures from Germany and a broadly optimistic assessment for the eurozone from the European Central Bank.  

The French economy grew by 0.8 percent in the second quarter from the first-quarter figure signalling that growth this year will be 2.2 percent on performance so far, the official statistics institute INSEE said on the basis of preliminary data.  

INSEE said that it expected the final figure for the second quarter to be 0.8-0.9 percent after growth of 0.8 percent in the first quarter.  

The figure for the quarter meant that growth for the whole year, barring an unforeseen slowdown, would be 2.2 percent.  

The statistics bureau said that given the strong showing for the second quarter, it was likely to raise its 2004 growth estimate.  

"Unless trend changes in the second half, which can by chance happen, French growth should be more than 2.3 percent in 2004," Insee official for the quarterly data, Guillaume Mordant, said.   

Economy and Finance Minister Nicolas Sarkozy had said at the end of July that French growth for the whole year might reach 2.5 percent.  

Many economists also expect to see growth of 2.5 percent this year after a dip to 0.5-percent growth last year, the worst performance since 1993.  

But although industrial output and the confidence of business leaders in small and medium-sized companies are showing signs of recovery, uncertainty hangs over household consumption, exports and company investment.  

Economists say that although domestic consumption should continue to underpin recovery, households are worried about unemployment which, INSEE says, is likely to remain at about 10.0 percent of the workforce.  

The surge of the price of oil is also a factor of uncertainty. At the end of June INSEE calculated that if the price of a barrel of oil remained for any length of time above USD 40, French growth would be reduced by 0.12 percentage points, and a price of USD 50 would reduce growth by 0.24 points.  

Sarkozy commented on Thursday that the use of nuclear power in France provided a cushion against the effects of the high oil price, saying that "50 percent of our energy comes from nuclear generation".  

On July 15 the Bank of France estimated that the economy would grow by 0.6 percent in the second and in the third quarters and by 2.3 percent over the whole year, unless output fell towards the end of the year.  

Sarkozy, who along with the whole French government is under strong pressure from EU institutions to reduce excessive public deficits and to curb overspending, said on Thursday that the latest data "place France in the leading group for growth in Europe and show that the government's support for purchasing power and consumption is bearing fruit".  

He said the figures supported prospects for a recovery of investment and employment this year.   Policies for encouraging confidence and putting public finances on a sound footing had to be pursued and would reduce unemployment, he said.  

At CCF bank, economist Jan-Eric Fillieule commented: "Germany and France, the two main countries in the eurozone, have announced good results for the second quarter. The recovery is being confirmed after a very bad time in 2003.    

At Banques Populaires Asset management, economist Philippe Waechter commented: "The French have dug into their savings to consume more. This has resulted in a rather marked acceleration of economic activity since the beginning of the year...It looks as if growth in 2004 might head towards 2.5 percent. Growth is likely to be about the same in 2005."

 

© AFP

 

Subject: French news

 

 

 

 

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