French central bank sees recession this year

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French central bank sees recession this year

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The central bank in Paris has said that it expects France’s economy to slip into recession as this year ends.

That would make it harder for the government of the eurozone’s second-largest economy to hit its debt-reduction targets for next year.

The Bank of France, which had already predicted gross domestic product would shrink 0.1 percent in the third quarter, says it now expects a similar 0.1 percent decline in the last three months of the year as well.

Economists said that was a more realist forecast than the Socialist government’s.

It is predicting growth of 0.8 percent next year, despite introducing cutbacks that are the biggest since the second world war.

That is part of efforts to slash France’s public deficit to 3.0 percent of GDP, from an estimated 4.5 percent this year.

President Francois Hollande’s Socialist government forecasts 0.8 percent growth in 2013 after 0.3 percent in 2012, and hopes that 30 billion euros of budget savings – comprising spending cuts of 10 billion and tax rises of 20 billion – will allow it to meet its European commitments on deficit reduction.

The risk, economists say, is that it cannot do both.