France 2012 growth forecast cut to 0.4%

The French economy will grow only 0.4 percent in 2012, the INSEE national statistics institute said on Tuesday, slightly less than the 0.5 percent previously forecast and budgeted by the government. INSEE said the French economy, which grew by 1.7 percent last year, will post near zero growth in the first two quarters of this year before growing 0.1 percent in the third quarter and 0.2 percent in the fourth. "France will suffer from a contraction in internal demand from its eurozone partners, which will hurt exports, and its efforts to consolidate its budget," said INSEE's research director Eric Dubois. Given the poor economic context, INSEE also forecast that French unemployment would rise from 9.3 percent of mainland France's active population at the end 2011 to 9.9 percent by the end of 2012. This number jumped to 10.3 percent when France's overseas territories was taken into account. INSEE said household demand would inch upwards by 0.2 percent in 2012, the same increase as last year, with consumers absorbing a 0.6 percent drop in overall purchasing power forecast for the year. The Bank of France last week cut its estimate for French growth, saying the eurozone's second-biggest economy would now likely contract by 0.1 percent in the second quarter. President Francois Hollande promised during his election campaign to reduce public debt based on a forecast of 0.5 percent growth this year and 1.7 percent in 2013. France's labour ministry said Tuesday that number of registered French job seekers jumped by 1.2 percent over the month to hit 2.92 million people in May, the 13th consecutive month the country's unemployment line increased.