Frances economic growth remained zero in 1st Q

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Frances economic growth remained zero in 1st Q

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The Bank of France had previously also forecast zero growth for the first quarter of 2012.

15 May,2012 07:09 pm

Frances economy stalled in the first quarter of 2012, official statistics agency INSEE said, highlighting the challenge to Socialist President Francois Hollande as he was inaugurated on Tuesday.In addition to recording zero growth in the first quarter, INSEE revised its fourth quarter 2011 growth figure down to 0.1 percent from 0.2 percent, while maintaining that the eurozones second biggest economy expanded by 1.7 percent last year.The stagnant state of French economic activity was a key factor in Hollandes victory over right-wing incumbent Nicolas Sarkozy, with the Socialist vowing to turn the economy around with a tax-and-spend plan to boost growth.Hollande was to meet Chancellor Angela Merkel later Tuesday in Germany, where he faced an uncertain reception over his vows to re-open talks on the European Unions fiscal austerity pact so that it focuses more on growth. He was also to name a prime minister tasked with forming a government ahead of the new cabinets first session, expected on Thursday.The figures add emphasis to the magnitude of the challenge facing the new government to be appointed tomorrow, said analyst Fabrice Montagne at Barclays Research in London. The Bank of France had previously also forecast zero growth for the first quarter of 2012 and the same for the second quarter.The European Commission is forecasting overall growth this year of 0.5 percent in France, in line with Hollandes budget predictions. But it is expects growth next year of only 1.3 percent, against a forecast of 1.7 percent under Hollandes economic programme.Michel Martinez, chief economist for France at Societe Generale, said Hollandes projections should be on target for this year but that the new government will have trouble reaching its 2013 goal. The real uncertainty is about 2013 and the 1.7 percent forecast seems really too high to me, he said.INSEE confirmed on Tuesday that Frances public deficit stood at 5.2 percent of gross domestic product (GDP) in 2011, down from 7.1 percent at the end of 2010.Montagne said the growth figure for the first quarter was in line with the overall consensus but slightly lower than Barclays had expected. However the figures showed that despite weak growth, France has not yet come close to recession. He said that a credit squeeze at the end of last year, rising unemployment, and tamed public consumption would probably weigh on growth in the next few quarters but that household consumption should provide some support.Surprisingly strong growth in Germany should also support France and the rest of the eurozone, Montagne added.