Now Available: France Business Forecast Report Q2 2013

New Country Reports market report from Business Monitor International: "France Business Forecast Report Q2 2013"

by Bill Thompson

(WireNews+Co) - Boston, MA - 18 February 2013

Core Views - France's economy is showing signs of a sharp economic slowdown in light of the deteriorating global macroeconomic backdrop, and while a return to recessionary conditions remains outside our core view for now, we note that the French economy and, in particular the domestic banking sector, are highly susceptible to a further intensification of the eurozone sovereign debt crisis.

We expect pressure to mount on the government to engage in more concerted fiscal consolidation in 2013, particularly given the minimal fiscal adjustment undertaken in 2012. While France has thus far not fallen prey to the bond vigilantes as has happened to the peripheral countries of the eurozone, the country has one of the largest public sector debt piles in Europe and remains susceptible to contagion effects.

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Major Forecast Changes

We have revised down our 2013 real GDP growth forecast for France to 0.4%, from a previous forecast of 0.6% on the back of our expectations for a weaker household segment and slowing external demand.

Key Risks To Outlook

Downside Risks To Fiscal Forecast: The possibility of a further intensification of the eurozone sovereign debt crisis and the potential need for state-led capital injections in the domestic banking sector keep the risks to our fiscal deficits over the medium term firmly to the downside.

Fiscal Risks Could Also Weigh On Growth: We see potential for a deeper than expected contraction in government consumption as revenues undershoot, forcing the government into pushing through deeper cuts in order to meet its fiscal targets. In this event, we would expect to see real GDP growth in 2013 drop to between 0.1 and 0.5%, with around 0.5 percentage points' lower headline growth in 2014.

Partial Table of Contents:

Executive Summary

Core Views

Major Forecast Changes

Key Risks To Outlook

Chapter 1: Political Outlook

SWOT Analysis

BMI Political Risk Ratings

Domestic Politics

Hollande's Political Scorecard

- Under a year into his presidency and in line with our previous expectations, Francois Hollande has already experienced a significant slide in popularity, with approval ratings falling to new lows of 37% in January, from 63% at the start of his tenure. Approval ratings are likely to continue falling, reflecting the failure of the traditional French policy tools in tackling new economic realities, and also the poor progress that Hollande has made in keeping a number of his key election pledges.

TABLE: POLITICAL OVERVIEW

Foreign Policy

Mali Crisis Crib Sheet And FAQ

- The decision by French President Francois Hollande to launch air strikes against Islamist militias occupying northern Mali has escalated the crisis in the West African state. Below, we highlight our core views on the evolving situation, and on what it would take to change it.

We also answer some frequently asked questions.

Chapter 2: Economic Outlook

SWOT Analysis

BMI Economic Risk Ratings

Fiscal Policy

Tough Year Ahead For Public Finances

- We maintain our forecast for France to miss its fiscal deficit target by 0.5 percentage points in 2013, expecting it to arrive at 3.5% of GDP owing to lower than projected economic activity and insufficient efforts to cut back public sector expenditure. Public debt loads are sustainable at current interest rates, although rising borrowing costs will remain an omnipresent risk.

TABLE: FISCAL POLICY

Economic Activity

Downgrading Growth For 2013

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