Hopes high for economic growth

FRANCE'S budget deficit predictions have been cut from 6% to 5.7%, the economy minister Christine Lagarde has announced.

Ms Lagarde added that she still expected growth of 2% for 2011 due to greater confidence in the industrial and service sectors.

She is determined to stick to the government’s plan to cut the deficit below 3% of gross domestic product in 2013.

The forecast on business activity and unemployment came from statistical body Insee which said that the economy had seen an “acceleration” in the first quarter. It added: “In our view, the shock is passing and activity has stayed strong”.

It reported that the economy had grown 0.6% in the first quarter, compared to the same period in 2010, but would slip slightly to 0.4% in the second quarter. To hit Ms Lagarde’s target of 2% the economy will now have to grow by 0.7% in both third and fourth quarters.

Household buying power has increased by a negligible amount but families have been hard hit by increased inflation due to the rise in oil price. It is expected to be 1.9% over the year to June, against 1.8% in December.

Rising raw material prices have, however, still to work through to the supermarkets, and shelf prices will rise in the coming months.

Ms Lagarde has said that 2010 was a “record-breaking year” for foreign direct investment, rising 22% from 2009 with 782 projects creating 31,000 jobs. This followed two years of stagnation.

Photo: Remy Steinegger