IMF Cuts French GDP Forecast, Calls Deficit Path Suitable

The International Monetary Fund cut its predictions for French gross domestic product growth this year and next and said President Francois Hollande’s plans to cut the budget deficit are appropriate.

France’s economy will probably expand 0.3 percent in 2012 and 0.8 percent in 2013, the IMF said today in its latest World Economic Outlook. That’s down from growth forecasts of 0.5 percent and 1 percent made by the lender in April.

The forecast matches the 0.3 percent growth Hollande’s government is predicting for this year and is less than 1.2 percent growth it expects next year. Still, the deficit-cutting plan set out by Hollande, who won office in May, sets the right pace for now, the IMF said.

“The new administration has committed to reducing its headline deficit by about 1 percent of GDP this year and 1.5 percent of GDP next year,” the Washington-based IMF said. “The underlying adjustment implicit in these targets is appropriate under the baseline scenario. However, in the event that growth disappoints, these targets could entail an excessive structural adjustment.”

To contact the reporter on this story: Mark Deen in Paris at markdeen@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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