The French economy is to stagnate in the last quarter of the year, the Bank of France warned today. The warning came just two days after the government announced a new round of austerity measures.
"Gross domestic product will be stable in the fourth quarter of 2011," the bank said in its monthly business climate report for October. The French central bank said industrial activity had "remained stable" in October and that service providers were reporting slower activity.
The sentiment indicator for industry had fallen in October to 96 from 97 while for the service sector it fell to 95 from 96, the central bank said. The central bank had forecast a 0.1% increase in French economic activity in the third quarter. Official figures are due next week.
Concern over the French economy and its exposure to the euro zone's ballooning debt crisis saw the government recently slash its 2012 growth forecast from 1.75% to 1%.
The government on Monday unveiled a €65 billion programme of budget cuts and tax hikes, including €18.6 billion in savings over the next two years, with the goal of eliminating the country's budget deficit by 2016.
The budget ministry said today that the central government budget deficit, a component of the overall deficit, had fallen by €30 billion at the end of September on a 12-month basis to €92.7 billion due to a big fall in spending and a slight rise in revenues.
The overall central government budget deficit for 2011 is expected at €95.5 billion, the ministry said. The government needs to keep its costs under control to hits its target of reducing the overall budget deficit from 5.7% of GDP this year to 4.5% in 2012. It is hoping to reach the European Union limit of 3% in 2013.
Spending to the end of September was down to €270 billion from €310.1 billion the year before, thanks largely to the end of extra costs associated with tax reforms, the ministry said. Revenues were up slightly to €207.3 billion against €204.4 billion the year before.
