💎 Fed’s first rate cut since 2020 set to trigger market. Find undervalued gems with Fair ValueSee Undervalued Stocks

French economy to shrink 0.4 percent in 2009 -OECD

Published 11/25/2008, 05:00 AM
Updated 11/25/2008, 05:02 AM

By Brian Rohan

PARIS, Nov 25 (Reuters) - The French economy will shrink 0.4 percent in 2009, the OECD forecast on Tuesday, ditching its previous prediction of 1.5 percent growth.

The euro zone's second-largest economy has so far avoided the recession which has hit neighbouring Germany and the wider euro zone, with GDP unexpectedly rising 0.1 percent in the third quarter this year.

But the Organisation for Economic Cooperation and Development said sharply deteriorating global economic conditions meant the country was clearly heading into recession. "The impact of this turbulence will reverberate well into 2009, with negative growth expected until the middle of the year," the Paris-based think tank said in its twice-yearly Economic Outlook.

This recession would push unemployment from 7.3 percent this year to 8.2 percent in 2009 and 8.7 percent in 2010, the OECD predicted.

The government's budget deficit would also rise to 3.7 percent of GDP next year, above the European Union ceiling of 3 percent, before it rises to 3.9 percent in 2010.

"Significant widening of the general government deficit is expected in both 2009 and 2010, despite the announced tightening of fiscal policy over the next few years," the report said.

"The scope for additional discretionary measures is limited by (France's) poor public finance position and prospects. The focus on expenditures control and reform of the public administration should be maintained," it added.

The French government is considerably more optimistic about its deficit breach, with budget minister Eric Woerth expecting it to hit only 3.1 percent of GDP in 2009.

But due to the gravity of the world economy, the excess may not matter much this time as the EU has said it would be flexible on its deficit rules on a country-by-country basis.

The OECD also said the economic slowdown should help to limit further increases in wages. It expected wage growth to slow to 1.6 percent in 2009 from 3.5 percent this year.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.