French Economy Grows 1.9% in 2007

Growth is lower than expected

After weak growth of 0.3% in the fourth quarter, the French economy grew by 1.9% last year, official data showed on Feb. 12. The government had calculated its budget for last year on the basis of growth of at least 2.25% percent. For this year, the government again expects growth of 2% - 2.5%.

President Nicolas Sarkozy was elected last year on promises to reform the supply-side of the economy. A key policy was to relax the 35-hour work week to allow people to do extra overtime, as part of an overall drive to raise spending power. However, household consumer spending, the main driver of French growth in recent years, slowed in the fourth quarter to growth of 0.4% after 0.8% in the third quarter, the data from the INSEE statistics institute also showed.

Finance Minister Christine Lagarde said that the slowdown in the last quarter had arisen because companies had drawn on their stocks of goods and materials and that it did not reflect a sharp and lasting slowing of the economy.

Analyst Nicolas Bouzou at Asteres financial consultants commented that the government faced a double challenge. "On the one hand, applying supply-side policies which might restore the competitiveness of the production system, and on the other, taking measures which prevent the slowing of consumption from gathering pace, given that the international slowdown reduces orders for French products."

Copyright Agence France-Presse, 2008

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