OECD sees exports lifting French economy

PARIS, Nov 26 (AFP) – The French economy will recover gradually next year as exports pick up after barely escaping a recession this year, the Organisation for Economic Cooperation and Development said Wednesday.

But stubbornly high unemployment was unlikely to start falling again until the end of 2004 and inflation, fuelled by rising food and tobacco prices, could sap consumer and business sentiment, the OECD warned in its twice-yearly Economic Outlook.

The export-driven recovery would boost business investment and feed through into the overall growth of the economy in 2004 and 2005.

The OECD estimated French growth in 2003 at 0.1 percent according to a chart although in the text it forecast 0.2 percent.

The chart showed growth picking up to 1.7 percent in 2004 and 2.4 percent in 2005.

That compared with forecasts for the eurozone as a whole of 0.5 percent this year and 1.75 percent in 2004 and 2.5 percent in 2005.

However, the Paris-based organisation warned: “The recovery could lose headway if business confidence fails to strengthen further or if real consumer demand falls by more than expected because of higher inflation.”

Food prices have been steadily on the rise in France and the government is planning to raise duties on tobacco.

Further appreciation of the euro was also a risk for recovery of the French economy.

It said that if the government were to fulfil promises to the European Union to reduce its deficits, greater efforts would be needed “to ensure that past slippages in the deficit will not be repeated.”

France is set to have a public deficit in excess of an EU limit of three percent of output for the third year running in 2004, which has sparked a major flap in with Brussels and some smaller EU parteners that have made painful efforts get their deficits down.

Looking at 2004, the OECD said, “unless additional savings beyond those already announced are found, the deficit will come in at around 3.75 percent of GDP (gross domestic product).”

It said that in the medium term an overhaul of the healthcare system could help contain government spending.

Subject: French news