France surprises with growth of 2% in 2017

THE FRENCH economy grew by a stronger-than-expected 2 percent last year, its best performance since 2011, in a year marked by a surprise acceleration in investment from companies and households, official data showed yesterday.

Buoyed by rock-bottom interest rates, a broad-based recovery among euro-zone peers and lower payroll taxes, French companies have bumped up investment to meet surging demand, and more-confident households have returned to the property market.

The 2 percent increase during 2017, a little higher than the 1.9 percent initially estimated, means that France outpaced Britain, which grew by 1.7 percent last year, although gross domestic product (GDP) fell short of 2.5 percent in the wider euro zone.

That marked a sharp acceleration from the performance of the previous five years, where the French economy flirted with stagnation, weighed down by mass unemployment and efforts to close a budget deficit via higher taxes.

The French government will take heart from the pick-up in investment, which bodes well for long-term growth.

Companies’ investment increased by 4.4 percent, while households’ jumped by 5.4 percent, mainly on the back of property purchases.

Although President Emmanuel Macron’s pro-business government has pointed at surging confidence since his election, the previous Socialist government has been quick to claim that its efforts to cut companies’ payroll costs are bearing fruit.

The European Central Bank, whose bond-buying programme has pushed interest rates to record lows, encouraging companies and households to take up cheap loans and mortgages, could just as well take credit.

However, despite a 3.3 percent rise in exports in 2017, foreign trade still shaved 0.3 points off French growth as a whole last year because of a more rapid surge in imports, at 4.1 percent.

In the fourth quarter, GDP rose by 0.6 percent after growing 0.5 percent the previous three months, Insee said, leaving its quarterly estimates unchanged. – Reuters