French govt maintains growth forecast

29th April 2008, Comments 0 comments

The government maintains its optimistic report despite scepticism expressed by European Commission.

29 April 2008

PARIS - The French government said Monday it was maintaining its 2008 and 2009 growth and public deficit forecasts, which are much more optimistic than those of the European Union.

The government sees growth this year of between 1.7 and 2.0 percent, with a public deficit of 2.5 percent of output. In 2009, growth should come to 1.75-2.25 percent, with a deficit reduced to 2.0 percent, according to Paris.

The European Commission meanwhile predicts French growth this year of only 1.6 percent and a shortfall in public finances of 2.9 percent. For 2009 the comparable forecasts are 1.4 percent and 3.0 percent.

"We are maintaining our projections, especially as we are seeing the first fruits" of the government's economic policies, a source with the finance ministry told AFP.

"The figures from the first quarter of 2008 are far from being bad," the source insisted.

The European Commission earlier Monday said France might need an early warning on its public finances, predicting that the French deficit was slipping dangerously towards an EU limit.

It said the public deficit, which covers central and regional government spending as well as the social welfare administration, would likely reach 2.9 percent this year before widening in 2009 to 3.0 percent - the maximum allowed under EU rules.

In light of those forecasts, EU Economic and Monetary Affairs Commissioner Joaquin Almunia said the situation "is a clear case for using the instruments that are at hand in such cases," which is to say, an early warning.

The finance ministry source argued that as "the Commission's growth forecast is more pessimistic" than that of the government, "its deficit expectations are as well".

He added that the Commission in its latest Economic Forecast report "did not mention the cost-cutting decisions announced earlier this month".

President Nicholas Sarkozy unveiled a 166-point plan aimed at generating EUR 7 billion in savings by 2011, most from replacing only half of retiring civil servants as well as from cuts in social, diplomatic and defence spending.

But the plans failed to impress private sector economists who said it was unlikely to eliminate the public deficit even by 2012.

Private economists foresee French growth of 1.5 percent this year and 1.7 percent in 2009.

The International Monetary Fund has predicted French growth of 1.4 percent in 2008 and 1.2 percent next year.

[AFP / Expatica]

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