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French economy still on track for 5% growth this year: central bank

A regional branch of the Bank of France in Nantes

PARIS (Reuters) – The French economy is still on course to rebound 5% this year despite the uncertainty created by the coronavirus pandemic, the head of the central bank said on Tuesday, reiterating its December forecast.

The euro zone’s second-biggest economy suffered its deepest post-war recession last year, with gross domestic product contracting 8.3% due to the coronavirus outbreak and measures to contain it, including two national lockdowns.

“I can confirm our forecast for 5% growth for the whole of 2021. It’s robust and rather cautious while reflecting of course the great uncertainty around the health situation,” Bank of France Governor Francois Villeroy de Galhau said in an interview with the Ebra regional newspapers group.

Finance Minister Bruno Le Maire has built the 2021 budget on a forecast for 6% growth this year, although he has in recent weeks indicated that that might be a stretch.

The central bank estimated on Tuesday that the economy was likely operating this month down 5% from pre-crisis levels, unchanged from the previous two months.

Companies consulted by the central bank in its monthly business climate survey reported stable expectations for business activity despite high uncertainty over the health outlook, the Bank of France said in a monthly report.

The French government has for now held off on imposing a new, third national coronavirus lockdown although it has also not ruled such action out if the outbreak risks spiralling further out of control.

Last month the government tightened restrictions by moving an 8:00 pm curfew to 6:00 pm and required large shopping centres to close as well as the hospitality and entertainment sectors, which have already been largely closed for months.

Reflecting such restrictions, the central bank’s survey showed that the service sector continued to be harder hit than the industry, where production capacity reached 74% in January compared with a pre-crisis average of 79%.

(Reporting by Leigh Thomas; Editing by Hugh Lawson)

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