PARIS, Aug 8 (AFP) : Gloom over the French economy deepened on Friday with a grim forecast from the central bank, in a new blow to the Socialist government of President Francois Hollande.
The bleak outlook for gross domestic product coincided with poor industrial production data, the latest in a string of indicators suggesting that France is a laggard in a generally weak eurozone recovery.
The Bank of France said it expected the economy to grow by 0.2 per cent in the third quarter compared with the previous three-month period.
Economists estimate that second-quarter figures will show almost zero, or even negative, growth, after flat growth in the first three months of the year.
If these estimates are borne out, the government will have no hope of achieving its target for 1.0-per cent growth for the full year.
That would hold back tax revenues and add to the government's already deep difficulties in meeting promises to the European Union to curb its budget deficits.
In the last eight days, both Hollande and Prime Minister Manuel Valls have sent strong signals of concern about the outlook.
Economists have warned for months that France, struggling to apply deep reforms, looks increasingly like the weak link in the eurozone and could even slip back into recession, as Italy did unexpectedly this week.
However, borrowing rates on French bonds, a vital measure of confidence, fell to record lows on Friday.
But analysts said the decline reflected the risks of tension over Iraq and Ukraine, and a flight of funds towards the safety of eurozone bonds.
The central bank's latest forecast was based on a monthly survey of businesses which reported that their output had edged up in July but would be flat in August.
The latest industrial output figures from the national statistics institute INSEE showed that activity slowed in the second quarter and is unlikely to rebound much in the third quarter.
Industrial activity picked up by 1.3 per cent in June, but for the whole of the second quarter output fell by 0.5 per cent from the first-quarter.
These are deeply worrying figures for the government.
This week Hollande urged Germany to use its strong trade surplus to boost demand from its businesses and consumers.
