The French economy shrunk by 0.3 percent in the second quarter of 2008, the government confirmed Friday as it prepared to present an annual budget against a background of world financial turmoil.
The figures -- unchanged from the initial estimate -- came amid a raft of negative economic indicators showing a mounting budget deficit and sharply rising jobless figures.
The INSEE statistics agency confirmed the negative growth figure in updated estimates, blaming a fall in exports for what is the first contraction in the eurozone's second largest economy since the fourth quarter of 2002.
On Monday, Finance Minister Christine Lagarde had predicted the French economy would grow by only one percent this year, lower than previous government forecasts.
Separately, Budget Minister Eric Woerth said the budget deficit would be equal to 2.7 percent of gross domestic product in 2008 and 2009, unchanged from 2007, rather than falling.
President Nicolas Sarkozy's government had initially promised to bring the deficit down to 2.5 percent this year and to two percent in 2009.
Later Friday, Woerth was due to present France's 2009 budget to parliament amid fears that the financial woes triggered by the subprime mortgage crisis and the collapse of US and British banks will drag down the world economy.
On Thursday, in a major speech, Sarkozy warned: "To tell the French people the truth, is to tell them the current crisis will have consequences in the coming months for growth, for unemployment, for purchasing power.
"The crisis is not over, it will have lasting consquences. France is too involved in the world economy for us to think for one second it could be sheltered from the events currently rocking the world."
Employment Secretary Laurent Wauquiez meanwhile estimated that August had seen another 30,000 to 40,000 job seekers register with the state unemployment agency.