Paris (AFP) – France’s economic growth will fall from 2.3 percent to 1.7 percent in 2018, the national statistics agency forecasted on Tuesday, adding to the budgetary strains on President Emmanuel Macron’s cost-cutting government.
Macron’s administration, which is on a mission to cut spending and keep France within European Union deficit targets, had been targeting growth of 2.0 percent for 2018.
“Growth is solid,” Finance Minister Bruno Le Maire insisted on Monday, adding he had “no particular concerns” on the subject.
But statistics agency Insee predicted the government would fall far short of its goal, dragged down by a strong euro and rising oil prices among other factors.
It expects gross domestic product (GDP) to rise by 0.3 percent in the second quarter — up from 0.2 percent in the first quarter — and by 0.4 percent in both the third and fourth quarters for a full-year figure of 1.7 percent.
France’s central bank earlier this month downgraded its 12-month growth figure to 1.8 percent.
After a “particularly sunny” year in 2017 for France and the eurozone, “clouds have appeared”, the head of Insee’s economic outlook division Frederic Tallet said.
On the domestic front the tailwinds include sluggish household consumption and nearly three months of rolling train strikes estimated to set back second-quarter growth by 0.1 percentage points.
But they also include external factors over which France has less traction, such as threats of a global trade war, rising oil prices, a strong euro and political uncertainties in Europe, including a new far right-eurosceptic coalition in power in Italy.
Corporate investment is predicted to slow from 4.4 percent to 3.1 percent over the year, while household investment is expected to decelerate from 5.6 percent in 2017 to 1.6 percent.
There was good news on the trade and unemployment fronts, however.
Unemployment, which is running at nearly twice the level of Germany or Britain, will fall only marginally, Insee said, forecasting a jobless rate of 8.8 percent at the end of 2018, down from 9.0 percent at the end of 2017.
After a slow start to the year exports are also forecast to rebound in the second quarter, powered by large orders in the aviation and shipbuilding sectors, the agency said.
Meanwhile, households will benefit from cuts in payroll and residency taxes.