French economy avoids recession, records 0.3% growth in 2013

Friday 14 February 2014 10.06
Growth at the end of the year was below expectations
Growth at the end of the year was below expectations

The French economy turned in slightly firmer growth than expected last year, expanding by 0.3%, but disappointed in the final quarter in a mixed message for the beleaguered government.

This was a stride ahead of the government's own estimate that the economy would limp into growth of just 0.1% in 2013, and will come as a small relief in the run-up to municipal elections.

Finance Minister Pierre Moscovici said in remarks on France 2 television that the latest official figures, although better than expected, meant that "more has to be done" to "get unemployment down".

The latest official figure for the year was just ahead of the national statistic institute's forecast in December of 0.2% growth.

But since then the INSEE institute had already slightly upgraded its estimates for growth in the first and third quarters, from shrinkage of 0.1% to zero.

However, in the last three months of the year, the economy showed growth of 0.3%, INSEE said in its first estimates.

That fell short of its forecast in December for expansion of 0.4%.

The government, faced with weak and unsteady recovery from recession, will be thankful for every extra drop of growth, as it struggles to engineer a change of policy to cut charges on businesses and to make deep cuts in public spending.

Growth raises the prospects of job creation, although these figures are far too low to begin to dent record unemployment in the country, one reason why Francois Hollande, a socialist, is suffering from the lowest approval ratings on recent record for a French president.

Growth also raises revenue from taxes which the Socialist-Green government urgently needs to help meet European Union rules for reducing the public deficit, along with fraught negotiations under way to cut deeply into public spending.

France has the eurozone's second-biggest economy.

The state of its finances is closely watched by its partners, in particular economic powerhouse Germany which reported growth of 0.4% for the last quarter, after 0.3% in the previous quarter.

Mr Hollande has turned his sights on the economy in the hope of avoiding a heavy defeat in local elections next month.

A critical factor in French growth is household consumption, and this rose by 0.4% last year having fallen by the same amount in 2012.

However, a vital factor in recovery is investment, and in the fourth quarter this showed signs of getting going, rising by 0.6% after seven quarters of retreat.

In remarks to AFP, INSEE explained: "There is really a coincidence of three factors: investment has risen after two years of falls, consumption was robust at the end of the year, and exports rose in the fourth quarter."

Moscovici said: "I am not satisfied, and I say 'let's do more'."