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French central bank trims 2018, 2019 growth outlook to 1.5 percent

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PARIS (Reuters) – The French economy is set to grow slightly less than previously expected this and next year, the central bank said on Thursday, warning the longer protests which have swept the country drag on the more they would weigh on activity.

In a quarterly update of its economic forecasts, the Bank of France projected the economy would grow 1.5 percent in 2018 and 2019, down from 1.6 percent for both years in previous estimates.

The forecasts do not include 10 billion euros (£8.99 billion) in tax cuts brought forward to next year and extra spending announced this week by President Emmanuel Macron in a major concession to protestors.

Central bank governor Francois Villeroy de Galhau said that though the protests were weighing on year-end activity, a rebound could be expected early next year.

Macron announced the concessions this week to quell a month-long popular revolt that started out over fuel tax hikes – since cancelled – but has morphed to target the high cost of living as well.

The yellow vest movement, named after the high-vis jackets French motorists must keep in their cars, has triggered the most violent street protests seen in decades.

The central bank has already forecast the protests would knock fourth quarter growth down to 0.2 percent from 0.4 percent in a previous estimate.

“Overall the more the movement lasts, the bigger the loss for the French economy,” Villeroy told French business newspaper Les Echos.

Villeroy said that growth would be supported next year by a pick up in consumer spending, boosted by a 1.3 percent increase in household’s disposable income even without taking into account Macron’s latest measures to lift purchasing power.

Consumers fed up with the high cost of living could also expect some relief from lower inflation, which the central bank forecast would ease to 1.6 percent on average next year from a peak of 2.6 percent in mid 2018.

(Reporting by Leigh Thomas; Editing by Toby Chopra)

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