Cyber Monday Deal: Up to 60% off InvestingProCLAIM SALE

Insipid French growth makes hard work for Hollande on jobs and deficit

Published 17/07/2014, 14:24
Insipid French growth makes hard work for Hollande on jobs and deficit

By Brian Love

PARIS (Reuters) - France's economic recovery remains so feeble that the government will miss an already extended deadline on deficit reduction and struggle to make meaningful cuts in high unemployment before 2016, a Reuters poll showed on Thursday.

The poll, conducted July 10-16, suggests output growth in the euro zone's second-largest economy will be 0.7 percent this year, a touch weaker than predicted just a few months ago.

That median prediction from 20 economists compares with the government's 1.0 percent growth target for 2014 GDP and a 0.8 percent forecast in an April Reuters poll.

The gap between government and independent forecasts even grows wider for 2015 and 2016, with the Reuters poll showing GDP growth of 1.3 and 1.5 percent respectively, significantly short of government targets of 1.7 and 2.25 percent.

"Despite repeated efforts to revive the reform momentum, political and economical woes are there to stay. France is set to experience a prolonged period of weaker growth, weaker than historical averages and weaker than European average," Fabrice Montagne, a senior economist at Barclays, said.

"With reforms and fiscal consolidation being implemented at best sequentially over the years, benefits on growth and unemployment will also only trickle through slowly and gradually."

Despite his pro-reform declarations, President Francois Hollande has yet to convince economists he will meet a European pledge to reduce the public deficit to 3.0 percent of GDP by end-2015 - a deadline that was already extended by agreement with EU partners from 2013.

The deficit is seen falling to 3.3 percent in 2015 from the 3.9 percent median forecast for 2014, before dipping in 2016 to 2.7 percent, comfortably below the 3-percent mark considered the maximum level that is manageable over the long term.

Making that task harder is the drain that high unemployment and the related benefit payments exert on public finances.

The jobless rate is expected to remain above 10 percent this year and next at 10.2 percent, before dipping only marginally to 10.0 percent in 2016, the median forecast in the Reuters poll showed.

While Hollande says economic recovery is taking hold and is counting on payroll tax cuts to help to boost hiring, recent indicators have not lived up to expectations.

French business activity contracted for the second month in a row in June after a brief foray into expansionary territory, according to the latest monthly PMI surveys.

(Editing by Jeremy Gaunt)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.