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Paris expects lower growth and worse deficit

Text by AFP

Latest update : 2008-11-06

France has announced the deficit will breach EU rules in 2009 by reaching 3.1% of output. French Finance Minister Christine Lagarde has also slashed 2009's growth forecast to 0.2-0.5% from 1% as expected earlier.

France on Thursday slashed its economic growth forecast for 2009 to 0.2-0.5 percent from 1.0 percent blaming fallout from the global financial crisis.
  
Economy and Finance Minister Christine Lagarde told the Senate that the forecast for 2010 had been cut to 2.0 percent from 2.5 percent.
  
She said the forecast for inflation next year had been cut to 1.5 percent from 2.0 percent earlier.
  
The minister said that growth forecast for next year was "the lowest ever used by a government in France" but that it was realistic.
  
The government had cut the forecast to take account of the fact the financial crisis had worsened and because the effects "are beginning to be felt and are going to last for several quarters", she said.
  
The crisis would "leave lasting effects on economies".
  
The forecast for inflation had been lowered to take account of a fall in prices for raw materials.
  
The government had also changed its expectations for the exchange rate, to a rate of one euro to 1.33 dollars next year instead of 1.45 dollars expected previously.
  
But the negative effects of the crisis would count more than the beneficial effects of a fall in inflation and of the value of the euro against the dollar, Lagarde said.

France's public deficit will rise to 3.1 percent of output next year, breaching a eurozone limit, the budget minister said on Thursday, raising the deficit forecast for this year to 2.9 percent from 2.7 percent.

Date created : 2008-11-06

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