France Sticks To Growth, Deficit Forecast

PARIS, (APP - UrduPoint / Pakistan Point News -20th Sept,2016) - France said Tuesday it was sticking to its economic growth forecasts for this year and next, seen by some economists as too optimistic.

In its 2017 budget draft law, the finance ministry said projected expansion would allow France to cut its deficit to below three percent of gross domestic product (GDP) in 2017 as required by eurozone rules, another target judged over-ambitious by many experts.

France's gross domestic product is expected to grow by 1.5 percent this year and next, while the ministry sees the deficit at 2.7 percent of GDP next year, down from 3.3 percent in 2016. According to the latest available figures published in July, GDP showed no growth at all in the second quarter, an outcome the government called "disappointing".

At the time, the ministry nevertheless reiterated its 1.5 percent growth forecast for the full year 2016, prompting analysts to scratch their heads.

Philippe Waechter, chief economist at Natixis, after the second-quarter figures were released.

But on Tuesday, Finance Minister Michel Sapin told a news conference that domestic factors for economic growth had been "more vigorous than expected" since the beginning of the year. Corporate investment is expected to rise by 3.8 percent this year, and by 3.5 percent in 2017, he said.

President Francois Hollande's five-year term will have resulted in deficit reduction and allowed France to "wipe out the deficits accumulating since 2008", he said. This will, however, barely make a dent in France's public-sector debt, the ministry acknowledged.

Debt is projected at 96.0 percent of GDP for next year, compared to 96.1 in 2016. The eurozone requires debt of under 60 percent of GDP.