France is going into period of no growth

PARIS - Agence France-Presse

A job seeker uses a computer to search for job opportunities in a National Agency for Employment in Nice, France. France’s unemployment rate is nearing 10 percent. REUTERS photo

The French economy appears to be settling into a period of no growth according to the INSEE national statistics institute, which halved late on Oct. 4 its 2012 growth forecast to 0.2 percent. The new forecast puts INSEE just below the government’s forecast of 0.3 percent growth to bring France’s public deficit to 4.5 percent of GDP as pledged to the European Union.

The French economy is stuck in neutral, said the head of INSEE’s forecasting unit Cedric Audenis. “It is not in ‘drive’ like the United States, but neither ‘in reverse’ like the eurozone overall” which is in recession, he added.

INSEE believes France will continue to escape recession, but stagnate with zero growth in the third and fourth quarter, as opposed to its previous forecasts in June of 0.1 percent and 0.2 percent growth respectively.

That would make for five consecutive quarters of no growth, an unprecedented stagnation for the French economy since World War II.

It would also make it more difficult for the French government to achieve next year its target of squeezing the public deficit to the EU limit of 3.0 percent of GDP, which is based on a growth forecast of 0.8 percent.

Audenis said 0.3 percent growth in each quarter would be necessary in 2013 to hit that target if the economy posts no growth in the final half of 2012.

 INSEE also forecast that unemployment in mainland France will reach 10 percent in the third quarter of 2012, the first time since 1999, and end the year at 10.2 percent.