France cuts growth forecasts

Date: Monday 02 Jul 2012

France will need to take 'immediate corrective action' in order to achieve deficit targets for this year and next, according to a report just released by the state auditor Cour de Comptes.

The government office notes that the prior forecast of 0.7% growth in the French economy this year is “outdated” and has calculated a more credible figure of a lesser 0.4% expansion. Using this data, the Cour de Comptes expects a shortfall of €6-10bn if France is to achieve its 4.4% public deficit target for 2012.

Just as French Finance Minister Pierre Moscovici noted yesterday in an interview with Le Figaro, the state auditor also believes that a 1.7% forecast for growth next year is unrealistic. In this context, the Cour de Comptes notes that “the effort in 2013 will be much larger” and, assuming a 1% growth estimate, says that France will have a €33bn shortfall next year in order to hit its deficit target of 3%.

The revised budget is expected to be presented to the French cabinet on Wednesday. Moscovici already warned that the Elysée would need to make immediate adjustments to the 2012 budget because “the one put together by the last government won’t allow us to reach the 4.5% deficit goal by the end of this year.”

JM

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