French GDP to rise by 1.2% in 2015 – BdF

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The Banque de France has published macroeconomic projections, foreseeing that the French GDP will rise by 1.2% in 2015, 1.8% in 2016 and 1.9% in 2017.

The institution said that a combination of factors would support the growth.

It listed external factors such as cheaper oil and a weaker euro nominal effective exchange rate, factors specific to factors specific to the euro area (expansionary monetary policy), and domestic factors (improvement in corporate profit margins).

The Banque de France highlighted that the French harmonised index of consumer prices’ inflation should remain “very low in 2015”, mainly due to cheaper oil, “at an annual average of 0.3%, before rising again to 1.7% by 2017.”

The institution pointed out that the measures introduced to cut labour costs “should also start to support activity via gains in cost competitiveness which will in turn boost exports, job creations and business investment.”

“Profit margins have already begun to recover, and this, combined with a persistently low cost of debt and projected increases in the capacity utilisation rate, should help to stimulate business investment.”

For 2015, investment is forecast to increase by 1.1%, by 4.4% in 2016 and 4.2% in 2017.

However, The Banque de France warned that the GDP growth would be weaker than expected if some events happen (slowdown in global growth, sharp rises in oil prices or in the euro exchange rate, onset of geopolitical crises).

It also said that the projections for 2016 and 2017 do not take into account the impact of the announced fiscal consolidation measures “which still need to be set out in detail and voted into law in forthcoming government budgets.”

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