French growth forecast up, deficit narrows slightly

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The French economy is set for slightly improved growth of 0.5 percent in the last quarter of this year, the Bank of France predicted on Tuesday, with the country's yawning trade deficit edging down.

The Bank of France has estimated that the economy grew by 0.3 percent in the third quarter, with statistics office INSEE to publish official growth figures on Friday, after the OECD warned that France's economy could be slowing down.

By comparison, data in continental rival Germany released on Monday showed that exports from Europe's largest economy were up despite a surprise decline in industrial output on the month.

The OECD on Monday singled out Germany as a European economy heading for expansion, while Britain, France and Italy were heading in the opposite direction.

In September, INSEE forecast "moderate" French growth of about 0.4 percent a quarter up to the end of the year, but thanks to second-quarter growth of 0.7 percent, INSEE now sees the economy growing 1.6 percent in 2010.

The government has targeted growth of 1.5 percent this year, in its budget statement for next year.

The growth rate is critical as it determines in turn forecasts for tax revenues at a time when France, like many of its European peers, is struggling to put its strained public finances in order.

The French trade balance showed a slightly improving deficit of 4.68 billion euros (6.49 billion dollars) in September down from 4.98 billion euros in August, customs data showed on Tuesday.

Exports in September dropped to 32.89 billion euros from 33.94 billion euros in August, with imports at 37.58 billion euros after 38.91 billion euros.

The customs figures showed that aerospace deliveries and pharmaceutical exports were down, along with exports to the European Union, especially Germany and newer member states.

Imports of chemicals and electronics were notably also down.

In Germany -- the world's second largest exporter after China -- data showed that exports rose three percent on the month to 84.3 billion euros but industrial output dropped 0.8 percent while analysts had expected a gain of 0.5 percent.

For the 12 months to September, France's trade deficit stood at 50.8 billion euros.

France's state deficit receded slightly to 124.2 billion euros at the end of September, compared to 125.6 billion a year ago, as the economy picked up after the crisis and thanks to 2009 stimulus measures, the budget ministry said.

State spending at the end of September this year reached 310.1 billion euros, compared to 263.9 billion last year.

"Spending progress is generally in line with budget predictions," the ministry said in a statement.

Meanwhile, French industry leaders said that they expected investments to be down two percent in 2010 from 2009, but with an upturn of nine percent expected in 2011, an INSEE survey showed.

The last quarterly survey had predicted investment growth of five percent in 2010 after the previous year's collapse.

© 2010 AFP

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