PARIS (MktNews) - French Finance Minister Laurent Fabius is set to officially revise down the government's forecast range for GDP growth this year to +2.7-3.1% from +3.0-3.6% after meeting with independent forecasters on Wednesday, according to the business press Thursday.
The ministry's GDP forecast range for growth next year is 2.8% to 3.2%, economists who attended the traditional spring forecasting session told the media.
The official revision confirms Fabius' hints in recent months that "turbulence" from the U.S. economic slowdown will have only a moderate impact on France's growth prospects, given strong domestic consumption and investment.
The government intends to stick to its public deficit targets of 1.0% of GDP this year and 0.6% next year, in line with its central fiscal Stability Program forecasts assuming growth of around 3%. This year's government budget is based on last autumn's central growth forecast of 3.3%.
Last year, the government was able to undershoot its public deficit target of 1.4% of GDP by 0.1 point. But this advance has already been used up by a shortfall of Ffr11 billion in complementary public pension funds due to a conflict with the employers' group Medef over a reform of the pension scheme, the daily La Tribune said.
In addition, security measures and public aid to cattle farmers hit by the mad-cow crisis will bring an additional Ffr2.5 billion in unplanned spending this year.
With its fiscal leeway reduced, the government remains under pressure from civil service unions to boost the 0.7% standard pay rise accorded for last year before beginning this year's negotiations. The unions have called for a general strike and demonstrations today.
After the disappointing results of last weekend's local elections, which saw the Center-Right opposition strengthen its hold in all but a few large cities, many members of governing Leftist coalition are pressing for higher social spending and wage hikes in order to win back voters on the Left.
Fabius expects real per-capita revenues to rise by 1.2% this year and 1.7% next year after barely +0.2% last year, assuming inflation of 1.5% this year and 1.2% next year, La Tribune said. This would mean an acceleration in private sector salary gains after the nominal 2% rise last year.
Employment is expected to rise by 2.8% this year and 2.0% next year after +3.6% in 2000, enough to lower the jobless rate to 7.5% next year from 9.0% in January, the daily Les Echos said.