French economy ended 2018 on a firmer footing than feared | The Daily Star
12:00 AM, January 31, 2019 / LAST MODIFIED: 12:06 AM, January 31, 2019

French economy ended 2018 on a firmer footing than feared

The French economy finished 2018 on a firmer footing than expected even after violent “yellow vest” protests that hit retailers especially, but growth still fell short of the government's target for the full year.

Data on Wednesday from the INSEE statistics agency showed the euro zone's second-biggest economy grew 0.3 percent in the final quarter of 2018, the same rate registered in the previous three months.

The growth was driven largely by exports, which helped offset a slowdown in consumer spending as waves of anti-government protests forced many stores in Paris to board up during the crunch pre-holiday period.

The preliminary reading topped expectations for growth of only 0.1 percent in a Reuters poll of 32 economists.

It nevertheless meant the French economy grew 1.5 percent for all of 2018, short of the government's forecast for 1.7 percent and down from a decade-high rate of 2.3 percent the previous year.

The first half of the year was even weaker than the second, with a tax hike hitting consumer spending in the first quarter and transport strikes weighing on second-quarter growth.

President Emmanuel Macron's government also expects the economy to post 1.7 percent growth this year, which would put France ahead of Germany for the first time in decade. The German government is expecting only a 1.0 percent expansion.

Desperate to contain the uprising testing his authority, Macron announced wage increases in December for the poorest workers and a tax cut for most pensioners.

The package of measures, which puts 10 billion euros into consumers' pockets, should give household spending a shot in the arm, a senior finance ministry official said.

“With what people have been saying about growth being much weaker, today's figures give us comfort in our growth forecast,” the official said, adding the 2019 forecast would be updated in April.

The finance ministry estimates that the yellow vest protests, named after the high visibility vests French motorists must keep in their cars, knocked 0.1 percentage points off growth in the final three months of 2018.

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