French central bank sees consumers driving gradual recovery

[PARIS] French economic growth will gain speed this year as low energy prices boosts consumers'purchasing power and firms hike investment spending, the Bank of France forecast on Friday.

In its biannual economic outlook, the central bank forecast growth of at least 1.4 per cent this year, unchanged from its December outlook, but trimmed its forecast for 2017 growth to 1.5 per cent from 1.6 per cent.

For 2018, it expects 1.6 per cent growth.

With low energy costs pulling down consumer prices, inflation would rise only 0.2 per cent this year before picking up to 1.1 per cent in 2017 and 1.4 per cent in 2018, it said.

But coupled with a falling savings rate, that would fuel healthy purchasing power gains for consumers this year despite only moderate wage increases, the central bank said.

Stars were also seen aligning for a rebound in corporate investment by 3.4 per cent this year and only slightly less in the next two years as firms are expected to benefit from recovering demand, cheap borrowing costs and improving profitability.

However, with growth hovering around the 1.5 per cent that economists say is the minimum for lowering unemployment, the jobless rate would dip only slightly from 10.1 per cent this year to 9.8 per cent by the end of 2018.

Turning to the public finances, the central bank expected the government to have little trouble cutting the fiscal deficit to less than three per cent of economic output as planned.

REUTERS