French economy grows 1.9 percent in 2007
French economy grew by 1.9 percent last year after weak growth of 0.3 percent in the fourth quarter
PARIS, February 15, 2008 - The French economy grew by 1.9 percent last
year after weak growth of 0.3 percent in the fourth quarter, initial official
data showed on Thursday, and analysts were gloomy about prospects this year.
The government had calculated its budget for last year on the basis of
growth of at least 2.25 percent. For this year, the government again expects
growth of 2.0-2.5 percent.
Right-wing President Nicolas Sarkozy was elected last year on promises to
reform the so-called supply-side of the economy, meaning policies to increase
A key policy was to relax the 35-hour work week to allow people to do extra
overtime, as part of an overall drive to raise spending power.
However, household consumer spending, the main driver of French growth in
recent years, slowed in the fourth quarter to growth of 0.4 percent after 0.8
percent in the third quarter, the data from the INSEE statistics institute
Finance Minister Christine Lagarde said that the slowdown in the last
quarter had arisen because companies had drawn on their stocks of goods and
materials and that it did not reflect a sharp and lasting slowing of the
Analyst Nicolas Bouzou at Asteres financial consultants commented that the
government faced a double challenge.
"On the one hand, applying supply-side policies which might restore the
competitiveness of the production system, and on the other, taking measures
which prevent the slowing of consumption from gathering pace, given that the
international slowdown reduces orders for French products."
At Xerfi analysts, Alexandre Mirlicourtois said: "At the current rate,
growth will amount to 1.5 percent this year: an unduly optimistic hypothesis
given the contrary winds which have arisen in recent months.
"The lungs of growth, consumption, have finally run out of breath. Things
could have been worse but for the unexpected boom in spending on energy."
Mathieu Kaiser at BNP Paribas also pointed to a sharp weakening of
household confidence amid high inflation and forecast growth of about 1.3
percent this year.