France Heads for Recession

22 December 2008

PARIS: The Frech economy grew by just 0.1% in the third quarter of 2008, and is likely to shrink by 0.8% in Q4 this year. In Q1 2009 a fall of 0.4% is forecast, as France looks set to plunge into recession for the first time since 1993, reports state statistics agency INSEE.

According to INSEE figures, the second quarter of 2009 will also see negative growth of 0.1%, and the economy is likely to contract for the year as a whole.

Says Eric Dubois, author of the agency's report: "In order for France to have merely zero growth next year, it will need to have the equivalent of a 1.4% expansion in the last two quarters of the year."

The study suggests that unemployment is likely to rise to around 8% by June 2009, and raises doubts about the strength of the country's banking sector in the face of the credit crunch.

Exports are also expected to decline by around 3% in mid-2008, with industrial production set to fall by 4% in Q4 2008 and 1.6% in the first quarter of 2009.

Despite this data, the country's finance minister, Christine Lagarde, reiterated her earlier forecast of economic growth in 2009 based on the introduction of an economic stimulus package.

Says she: "I'm sticking with a range of 0.2% to 0.5%, as while there will be a considerable deterioration in the business climate, there will also be a French recovery programme which [it] is estimated will add 1.0% to GDP growth, and the effect on France of recovery programmes of other EU countries that could add 0.5%."

Data sourced from France24; additional content by WARC staff