IMF: French Growth Weak, Will Miss 2013 3% Deficit Target
The IMF said Friday that France's growth outlook "remains fragile" and warned that it would probably miss its target of reducing its public deficit to three percent next year.
"Growth remains sluggish and the near-term outlook is subject to downside risks," it said, saying France's 2013 deficit would not fall below 3.5 percent, while growth will fall from 1.7 percent in 2011 to 0.2 percent in 2012.
President Francois Hollande's French government has built its 2013 budget on an expectation of reducing its annual deficit to three percent of GDP, the threshold imposed on members of the eurozone single-currency bloc.
But Hollande's team is hoping that growth will recover to 0.8 percent next year, a figure economists at the International Monetary Fund -- the global lender of last resort -- regard as over-optimistic.
"The growth outlook for France remains fragile reflecting weak conditions in Europe," the IMF said, following its "Article IV" consultation with France, an annual check-up on the health of national economies.
"In this environment, growth is expected to slow markedly from 1.7 percent in 2011 to 0.2 percent in 2012, and to recover only very gradually to 0.4 percent in 2013," said the body, in a statement issued in Washington.
"With job creation remaining subdued, unemployment is expected to rise further," it said, warning efforts by European governments to reduce their deficits "will continue to depress demand."
"The recovery of the French economy is also hampered by a loss of competitiveness which is reflected in a steady loss of export market share and low profit margins relative to European partners," it said.
"The competitiveness gap owes largely to impediments in the functioning of labor and product markets -- especially services -- accumulated over time."
But the statement said the IMF's own directors were divided over whether Hollande's government should try harder to try to hit its deficit reduction target, or ease up on fiscal tightening in order to support growth.