France′s economy contracts | News | DW | 08.06.2012
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France's economy contracts

The French economy has contracted, according to the country's central bank. But with the public deficit falling and the French government making robust growth forecasts, signals about the health of the economy are mixed.

Banque de France.

Banque de France

The Bank of France on Friday curtailed its French growth projection, saying the economy was on course to shrink by 0.1 percent in the second quarter.

If the estimates are correct, it would represent France's first quarterly contraction since the country managed to extract itself from recession in 2009. Although the current alleged shrinkage would not put France back into recession territory, if the economy were to experience a second contraction in the third quarter, the country would officially join other EU states like Greece, Spain and Italy in recession.

The forecast contrasts with the central bank's prior projection of essentially flat-line growth in the three months from April to June.

The news comes after the French national statistics office, INSEE, reported on Thursday that unemployment rose to one in ten people in the first quarter of 2012, a level of joblessness that the country has not endured since 1999.

Meanwhile, the French customs service posted a reduction in the country's national trade deficit in April from 7.3 billion euros to 5.8 billion euros.

"Exports are generally well oriented, but suffered from hits in the aeronautic sector and a decline in sales of refined petroleum products," the customs service said in a statement.

"Imports are underpinned by large purchases of energy products, intermediate and capital goods," it added, referring to products often used for making finished goods.

Mixed signals

But the French public deficit fell by 1.5 billion euros in April year-on-year. The budget ministry attributed the fall to higher tax revenues and a windfall from the selling of fourth-generation phone frequencies. And, according to a ministry statement, France is “at this point in the year" on target to trim its public deficit in accordance with the 2012 budget outlined by the former Sarkozy government- it has decreased to 59.9 billion euros.

The European Commission has predicted that the French economy will grow by 0.5 percent this year, corroborating projections by the new socialist government led by Francois Hollande. But the Commission's expectations for growth the year after, at 1.3 percent, are more modest when set against Hollande's forecast of 1.7 percent, an objective tied to his new economic plans for the country.

sej/tj (AFP, dpa)