2013-01-01 00:13:55 - France Business Forecast Report Q4 2012 - a new country guide report on companiesandmarkets.com

France´s economy is showing signs of a sharp economic slowdown in light of the deteriorating global macroeconomic backdrop, and while we do not expect France to enter a deep recession in 2012 or 2013, we note that the French economy, and in particular the domestic banking sector, is highly susceptible to a further intensification of the eurozone sovereign debt crisis.

We expect pressure on the government to engage in more concerted fiscal consolidation to mount over the coming quarters. While France has thus far not fallen prey to the bond vigilantes like the peripheral countries of the eurozone, the country nonetheless has one of the largest public sector debt piles in Europe and remains susceptible to contagion effects.

Major Forecast Changes

We

 

 

have revised down our 2013 growth forecasts for France to 0.9%, from a prior forecast of 1.1% on the back of our expectations for a sluggish eurozone recovery.

Key Risks To Outlook

Downside Risks To Growth Forecast: Should the regional and global macroeconomic backdrop continue to deteriorate, France would likely suffer a more pronounced slowdown in headline growth than currently expected, particularly given its heavy trade integration with Western Europe

Downside Risks To Fiscal Forecast: The possibility of a further intensification of the eurozone sovereign debt crisis and the potential need for state-led capital injections in the domestic banking sector keeps the risks to our fiscal deficits over the medium term firmly to the downside.

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