Friday, 10 April 2015

France cuts 2015-16 deficit forecasts, trims growth estimates

In World Economy News 10/04/2015

France will cut its public deficit slightly more than planned this year and next and bring it under the EU’s cap of 3 percent of GDP in 2017 as expected, government officials said.
While it hopes to do better thanks to a weak euro and oil prices as well as low debt interest rates, the government stuck to its 1 percent growth forecast for this year and trimmed it slightly to 1.5 percent for 2016 and 1.5 percent in 2017.
The government had said last month that it hoped to bring its budget deficit to around 3.8 percent of economic output in 2015, down from its previous 4.1 percent estimate.
It fine-tuned the estimate on Wednesday by saying it now targets a deficit of exactly 3.8 percent of GDP this year and 3.3 percent in 2016, down from its latest 3.6 percent target for that year.
The euro zone’s second-largest economy has exasperated many of its EU peers by repeatedly missing fiscal targets. It changed tack a few months ago by being more cautious in its forecasts.
The government did not say on Wednesday by how much France would cut its structural deficit, a key indicator for the European Commission’s assessment of its budget. That data will be unveiled next week, officials said.
Budget Minister Christian Eckert said on Tuesday that France would target a smaller reduction in its structural budget deficit in 2016 and 2017 than called for by the European Commission in order to preserve growth.
Eckert said the amount of effort asked for on the structural deficit — which strips out the effects of the economic cycle — was too high, potentially leading to new friction between France and its euro zone peers after Paris won a two-year reprieve on its headline deficit.
Officials did not spell out the 3-4 billion euros in extra savings France must make in the 2015 budget to meet EU requests.
Inflation will be much lower this year than the government had forecast in its 2015 budget law. It slashed the forecast to 0.0 percent from its previous 0.9 percent estimate.
Inflation is forecast to pick up to 1.0 percent next year and 1.4 percent in 2017.
Consumer spending will jump by 1.5 percent in each of the next three years. Corporate investment, excluding construction, will rebound with 1.5 percent growth this year, surging to 4.6 percent in 2016.
France’s gross public debt will grow from 95.0 percent in 2014 to 96.9 percent in 2017, officials said.
Earlier on Wednesday the government announced 2.5 billion euros ($2.72 billion) over five years for tax rebates to boost corporate investment.

Source: Reuters (Reporting by Ingrid Melander and Jean-Baptiste Vey; Editing by Leigh Thomas and Andrew Roche)