2013-01-01 13:43:52 - France Business Forecast Report Q1 2013 - 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 a return to recessionary conditions remains outside our core view for now, 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, particularly following elections in early 2012. While France has thus far not fallen prey to the bond vigilantes that have plagued the peripheral countries of the eurozone, it has one of the largest public sector debt piles in Europe and remains susceptible to contagion
Major Forecast Changes
We have revised down our 2013 real GDP growth forecast for France to 0.6%, from a previous forecast of 0.9% on the back of our expectations for a weaker household segment and slowing external demand.
Key Risks To Outlook
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 keep the risks to our fiscal deficits over the medium term firmly to the downside.
Fiscal Risks Could Also Weigh On Growth: We see potential for a deeper than expected contraction in government consumption as revenues undershoot, forcing the government into pushing through deeper cuts to meet its fiscal targets. In this event, we would expect to see real GDP growth in 2013 drop to between 0.1 and 0.5%, with around 0.5 percentage points lower headline growth in 2014.
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