PARIS (Reuters) – Strong job creation and household purchasing power will help the French economy this year resist a slowdown taking hold in other big euro zone countries, the French central bank forecast on Tuesday.
The euro zone’s second-biggest economy is on course to grow 1.3% this year and next, the Bank of France said in its quarterly outlook, marginally trimming its 2020 forecast from 1.4% in June.
The forecasts lend credence to the government’s economic outlook as it prepares a 2020 budget to be published at the end of the month based on expectations that the economy will grow 1.4% this year and 1.3% next year.
The French economy’s relative resilience strikes a stark contrast with Germany as the euro zone’s traditional powerhouse teeters on the brink of recession.
Less exposed than its northeastern neighbour to the global trade slowdown, French growth would be underpinned this year by a 1.3% increase in consumer spending, revised up from 1.1% in June, the central bank estimated.
Households’ purchasing power would grow at the fastest pace since 2007 boosted by low inflation and an array of tax cuts President Emmanuel Macron has rolled out in concessions to anti-government “yellow vest” protesters.
The labour market would also offer a tailwind to the economy, with jobs being created much faster than expected only a few months ago. The central bank forecast the economy would add 271,000 net new jobs this year, revised up by 122,000 since June.
Although that rate of job creation was expected to slow from next year, the central bank estimated that productivity would pick up, helping boost wages in the coming years.
By the end of 2021, the Bank of France forecast the unemployment rate would stand at a 13-year low of 8.0%, down from 8.5 on average this year.
(Reporting by Leigh Thomas; editing by Richard Lough and Ed Osmond)