French economy to dip 0.6% in Q1

The French economy is set to shrink by 0.6 per cent in the first quarter of this year, the Bank of France forecast yesterday, signalling a formal recession.

If the economy does contract as the central bank expects, after widely expected shrinkage in the fourth quarter, the economy will have shown two quarters running of negative growth which marks recession.

The economy contracted in the second quarter of last year but achieved growth of 0.1 per cent in the third quarter, thereby narrowly averting recession.

But economists expect data for the fourth quarter to show a clear contraction.

The official statistics institute Insee is to publish on Friday its first data for growth in 2008. Most economists and the government expect the figure for gross domestic product in the fourth quarter will be very weak, showing a contraction of about 1.0 per cent.

Economy Minister Christine Lagarde said last week that conditions in the fourth quarter were the worst "ever seen", referring to a "collapse of industrial production, particularly in November and December".

Forecasts so far put growth for the whole of 2008 at 0.7-0.8 per cent.

Lagarde said the government was waiting for publication of these results to revise its forecasts for growth in 2009, which stand so far at 0.2-0.5 per cent.

The minister has also acknowledged that she would be "very surprised" if the French economy grew in 2009.

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