PARIS: France is on course for its strongest growth since 2011 this year as foreign trade proves less of a drag and the unemployment rate falls, the INSEE statistics agency forecast on Tuesday. The French economy will grow 1.6 percent this year, up from 1.1 percent last year when foreign trade weighed heavily because of the worst wheat harvest in decades and tourists stayed away after militant attacks, INSEE said in its quarterly economic outlook. The improvement gives President Emmanuel Macron an economic tailwind his predecessor Francois Hollande never had, which will help France’s new leader push his reform agenda, starting with an overhaul of the labour code.
The pickup will also reduce France’s lag behind average euro zone growth, which INSEE projected would reach 1.8 percent after 1.6 percent last year. INSEE forecast consumer spending would slow to 1.2 percent this year from 2.1 percent last year as households’ purchasing power was eroded by higher inflation, which was seen averaging 1.1 percent over the year. Meanwhile, household investment was seen surging 3.7 percent, the fastest rate since 2006, boosted by real estate purchases, which was in turn supporting the long-struggling construction sector.
On the employment front, the economy will create 222,000 new jobs this year, down from 255,000 in 2016 because of the expiration at the end of month of a temporary state handout for small and mid-sized firms that hire workers. As more people got work, the jobless rate was seen falling to 9.4 percent by year end, hitting the lowest level since late 2011. After a weak start to the year due to a slump in new Airbus shipments, the foreign trade balance would improve with the delivery of a giant new cruise ship and other big transport contracts. As a result, foreign trade was seen subtracting only 0.3 percentage points from growth this year after 0.8 percent in 2016 when floods severely hurt the wheat harvest. On a quarterly basis, INSEE estimated the economy would grow 0.5 percent in both the second and third quarters and ease to 0.4 percent in the final quarter of the year.
