France reduces economic growth forecast

Christine Lagarde, the French Economy and Finance Minister, announced today that the country has had to reduce its economic growth forecast for 2009 from 1 percent to 0.2-0.5 percent as a result of the global downturn.

It is the slowest economic forecast that the French government has ever made. Inflation for the same period has been cut by 0.5 percent from 2 percent last year.

The budget through to 2009 has been made on the assumption that a barrel of oil will average $72 and that the euro will be at $1.33 hence the reason for the reduction in inflation.

The move was highly anticipated by analysts across the euro zone, as the European Commission has similarly lowered its forecasts, although has predicted no growth in 2009 and a 0.8 percent increase in the economy by 2010.

As France flirts with recession at the moment, the country did enter a recession back in 1993 as the economy shrank for 6 months.

There is currently a shortfall in the nation’s finances although President Nicolas Sarkozy has reiterated that taxes will not be increased to bridge the gap as tax receipts are 3 billion euros lower than in 2008.

Public debt is likely to increase to 67.9 percent of GDP in 2009 and is expected to reach record levels of close to 70 percent in 2010, before it stabilises to pre-credit crunch levels in 2012.

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