The French economy will expand less than President Francois Hollande’s government expects this year and unemployment will climb as consumer spending and exports fail to accelerate, the national statistics office predicted, reports Bloomberg.
Gross domestic product will grow 0.7 percent in 2014, Insee said yesterday. The government is counting on growth of 1 percent to help meet its promise to reduce the budget deficit to 3.8 percent of GDP.
“The purchasing power of households has improved, of course, but too modestly to bring a real acceleration in spending,” Insee said. “Faced with demand that isn’t taking off and margins that remain low, companies are not inclined to invest and French exports won’t fully benefit from the improved world trade.”
The remarks show how Hollande is struggling to revive Europe’s second-largest economy after two years in office. The Socialist president has pledged to cut public spending by 50 billion euros ($68 billion) over the next three years and halt tax increases in an effort to bolster confidence and investment.
Finance Minister Michel Sapin said that the government will maintain its target in the expectation that a tax credit for business that is kicking in now will help growth accelerate in the second half.
Read more of this report from Bloomberg.