French economy grows by 1.9pc in 2017

January 31, 2018 00:00:00

PARIS, Jan 30 (Agencies): The French economy notched up its fastest growth in 10 years in 2017, expanding by 1.9 per cent, the national statistics institute INSEE calculated on Tuesday.

The figure, in line with forecasts by both INSEE and the Bank of France, represented a marked pick-up from 2016, when gross domestic product grew by 1.1 per cent.

The economy performed particularly strongly in the fourth quarter of last year when GDP expanded by 0.6 per cent, the statisticians calculated. The government had been pencilling in growth of 1.7 per cent for last year. But Finance Minister Bruno Le Maire recently hinted that the performance could be even better, saying that "growth is solid. It may be close to 2.0 per cent in 2017."

The French economy rounded off its strongest year since 2011 with quarterly growth boosted by a spurt in business investment and exports in the final three months, official data showed.

The euro zone's second-biggest economy grew 0.6 per cent in the October through December period from the previous quarter when it grew 0.5 per cent, the INSEE official statistics institute said.

Finance Minister Bruno Le Maire gave credit for the strong showing to surging consumer and business confidence since President Emmanuel Macron's election in May, and reforms undertaken since then.

"According to the latest indicators, this trend should keep up in 2018," Le Maire said in a statement.

The full-year growth rate exceeded the 1.7 per cent on which France's budget was based, which increases the chances that France achieved its pledge of cutting the public sector deficit to less than three per cent of gross domestic product last year for the first time in a decade.

After years of mediocre growth, businesses are increasingly struggling to take on workers and expand factories fast enough to keep up with demand.

"There's not much spare capacity for the economy to absorb now that growth has strengthened. With the outlook remaining positive over the next two years, capacity constraints and domestic inflationary pressures may well rise," Morgan Stanley economists wrote in a research note.