France follows IMF in slashing growth forecasts

France bows to reality on growth, deficit goals but outlook still rosier than IMF's

Associated Press

PARIS (AP) -- The French government has finally bowed to reality, lowering its official economic growth projections and acknowledging that its deficit won't fall as quickly as promised. But its outlook is still rosier than other independent forecasts.

In a report Wednesday, the government said growth will be just 0.1 percent this year and 1.2 percent next — a big drop from 0.8 percent and 2 percent previously. The new estimates are in line with what the European Commission has said for months.

But even after the downgrades, the forecasts are still above those of many independent economists. On Tuesday, the International Monetary Fund slashed its forecasts, predicting France's economy will contract 0.1 percent this year and grow 0.9 percent next.

Since the government has said it won't cut any more spending, lower growth means higher deficits: As a result, it won't cut the deficit to 3 percent of annual gross domestic product until next year and won't balance the budget during President Francois Hollande's term.

That's a major departure from Hollande's campaign promises — but not all that surprising given that no French government has balanced a budget in nearly 40 years, despite promises by most to do so.

Instead, the government says the deficit will fall to 3.7 percent of annual gross domestic product this year and to 0.7 percent in 2017.

It's been a long road down for the French government's growth projections, which started at 1.7 percent for this year during Hollande's campaign for the presidency last year.

The government says that in addition to meeting less stringent targets, it hopes to rein in the deficit by going after tax fraud.

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