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France

France faces recession, 1% drop in growth in 2009

Latest update : 2009-02-13

France will dip into recession this year as growth shrinks by at least 1 percent, government sources said on Thursday. The Finance Ministry had previously forecast an economic expansion of between 0.2 and 0.5 percent for 2009.

AFP - France will fall into recession this year, with growth likely to shrink by at least 1.0 percent, the government said Thursday following a sharp contraction in momentum in fourth quarter 2008.
   
Gross domestic product will "shrink by at least 1.0 percent in 2009," a source close to Finance Minister Christine Lagarde told AFP.
   
"It could be minus 1.0 or minus 1.1 or minus 1.2 percent," the source added. The ministry had previously forecast an expansion this year of between 0.2 and 0.5 percent.
   
Earlier Thursday statisticians at the national statistics body INSEE, citing provisional figures, said growth contracted 1.2 percent in the fourth quarter of 2008, when overall growth came to 0.7 percent.
   
The reported quarterly performance was the worst since the 1974 when the country was suffering from an economic crisis brought on by oil market disruptions.
   
The gross domestic product figures are scheduled to be officially released early Friday but were revealed Thursday by INSEE statisticians who are protesting plans for their transfer from Paris to Metz in eastern France.
   
Lagarde said she deplored the early release of the INSEE data.
   
The economy managed to expand by 0.1 percent in the third quarter of 2008 after contracting in the second, thereby narrowly averting recession defined as two successive quarters of negative growth.
   
"After having been one of the rare European countries where economic activity increased in the third quarter, France at the end of 2008, as did its European neighbors, suffered from the negative effects of the financial crisis  that erupted last September," Lagarde said in a statement.
   
She attributed the fourth quarter results to a pronounced fall in company inventories, "a sign of hesitancy in the face of a very uncertain climate," as well as "a crisis in the auto sector."
   
But she stressed that such factors were largely temporary in nature and pointed to household spending, which has "put up remarkable resistance."
   
The fourth quarter figures "do not mean that the situation is going to get worse in the next few months," she added.
 

Date created : 2009-02-13

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