PARIS (MNI) – With a sharp slowdown in growth triggered by the
Eurozone debt crisis, France may have slipped into a “short, shallow”
recession, the Organization for Economic Cooperation and Development
said on Monday.
In its semi-annual Economic Outlook, the OECD said it expected
France’s economy to grow by just 0.3% in 2012, before recovering to 1.4%
growth in 2013. Unemployment is likely to reach a peak of around 10.4%,
while inflation falls to around 1%, the organization said.
The OECD noted that the exposure of French banks to countries at
the heart of the debt crisis has led to a sharp rise in French
government bond yields relative to Germany.
“With contagion having spread to France, higher borrowing costs
will affect the whole economy,” the OECD said.
The organization said its forecast assumed that the government
would reach its deficit targets of 4.5% of GDP in 2012 and 3% in 2013.
But given the slow pace of growth and the higher cost of debt, the OECD
said that reaching the 2012 target would require additional cuts equal
to around 0.4% of GDP.
–Paris bureau: +3314271-5540; jduffy@marketnews.com
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