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 today.
In its biannual economic outlook, the central bank forecast growth of at least 1.4% this year, unchanged from its December outlook.
But it trimmed its forecast for 2017 growth to 1.5% from 1.6%. For 2018, the Bank of France said it expects 1.6% growth.
With low energy costs pulling down consumer prices, inflation would rise only 0.2% this year before picking up to 1.1% in 2017 and 1.4% 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% 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% that economists say is the minimum for lowering unemployment, the jobless rate would dip only slightly from 10.1% this year to 9.8% by the end of 2018.
Turning to the public finances, the central bank said it expected the French government to have little trouble cutting the fiscal deficit to less than 3% of economic output as planned.