• France's news in English

French economy set to shrink: bank

AFP · 10 Sep 2012, 10:19

Published: 10 Sep 2012 10:19 GMT+02:00

Facebook Twitter Google+ reddit

If confirmed, it would be France's first contraction since it came out of recession in 2009 and follows zero growth for the past three quarters.

If followed by another negative quarter it would signal the French economy has entered a recession, which is commonly defined by economists as two consecutive quarters of contracting activity.

A forward-looking survey of business activity, the Purchasing Managers' Index compiled by survey firm Markit, has been running for months below 50 points, which indicates a likely contraction.

Markit said last month that French "PMI data currently suggest contraction is on the cards for" the period from July to September.

French President François Hollande said Sunday he expected economic growth to be "barely above zero" for 2012.

The government has forecast 0.3 percent growth for the year, while the OECD last week revised down its forecast for French 2012 growth to 0.1 percent.

Slower growth or a drop in revenues would make it more difficult for France to meet its EU obligations to cut its public deficit to 4.5 percent of gross domestic product this year.

The government has so far kept its 2013 forecast at 1.2 percent, which most economists now consider unreasonable.

Hollande said Sunday that the 2013 draft budget to be presented at the end of the month would be based on a realistic forecast, most likely 0.8 percent.

"I hope that we will do better than 0.8 percent, but hypothetically, we will work with that forecast," the president said in a nationally televised speech.

Story continues below…

France has promised to squeeze its public deficit back to the EU limit of 3.0 percent of GDP next year, and Hollande has said this pledge must be honoured if the country wants to maintain its credibility on the markets.

To meet that obligation France will need to raise an extra €20 billion next year – half from businesses and half from households – in the biggest tax hike for at least the past three decades.

Another €10 billion in spending cuts will be made.

Facebook Twitter Google+ reddit

Your comments about this article

Today's headlines
France given wake up call as it bids for Brexit business
The business district 'La Defense' in Paris. Photo: AFP

France clearly has some work to do if it really wants to pinch business from the UK post-Brexit.

Mouth fun? French words you just can't translate literally
Do you know the French word for throat-support? Photo: AFP

Word of warning: Don't translate French literally.

How France plans to help its stressed-out police force
Yellow smoke rises around French police officers in Paris holding a banner reading "Solidarity with our colleagues, police angry". All photos: AFP

Could these measures stop the cops from protesting?

'3,000 migrants dispersed' after 'Jungle' clearance
Photo: AFP

While thousands of migrants have been bussed out around France, new ones are arriving all the time and thousands of others have simply been dispersed aid agencies say.

Fifteen of the most bizarre laws in France
Photo: Matthew Powell/Flickr

A must read for anyone who wants to stay on the right side of the law in France.

Medieval town in south of France upholds ban on UFOs
The town of Châteauneuf-du-Pape. Photo: Aa77zz/Flickr

Aliens take note.

American tourist dies at French Riviera sex club
The Riviera resort of Cannes. Photo: AFP

American tourist reportedly fell five floors after being pushed outside the underground sex club in Cannes.

Paris: 'Flying' water taxis to be tested on River Seine
Photo: SeaBubbles

An in Seine idea surely? But tests will go ahead.

France joins fight for rich pickings from post-Brexit UK
Photo: AFP/DcnH/Flickr

France tries to woo EU's bank regulator and other agencies.

How speaking French can really mess up your English
Photo: CollegeDegree360/Flickr

So you've mastered French, but now it's time to learn English all over again.

The annoying questions only a half French, half Brit can answer
Sponsored Article
Last chance to vote absentee in the US elections
Forget Brangelina's chateau - here are nine others you've got to see
The must-see French films of the millennium - Part One
How life for expats in France has changed over the years
Why Toulouse is THE place to be in France right now
Video: New homage to Paris shows the 'real side' of city
The 'most dangerous' animals you can find in France
Swap London fogs for Paris frogs: France woos the Brits
Anger after presenter kisses woman's breasts on live TV
Is France finally set for a cold winter this year?
IN PICS: The story of the 'ghost Metro stations' of Paris
How to make France's 'most-loved' dish: Magret de Canard
Welcome to the flipside: 'I'm not living the dream in France'
Do the French really still eat frogs' legs?
French 'delicacies' foreigners really find hard to stomach
French are the 'world's most pessimistic' about the future
Why the French should not be gloomy about the future
This is the most useful French lesson you will ever have. How to get angry
Why is there a giant clitoris in a field in southern France?
French pastry wars: Pain au chocolat versus chocolatine
Countdown: The ten dishes the French love the most
Expats or immigrants in France: Is there a difference?
How the French reinvented dozens of English words
jobs available