Recently published research from Business Monitor International, "France Business Forecast Report Q3 2013", is now available at Fast Market Research

Boston, MA -- (SBWire) -- 05/28/2013 --France's economy is showing signs of a sharp economic slowdown in light of the deteriorating global macroeconomic backdrop, and while a return to severe recessionary conditions remains outside of our core view for now, we note that the French economy, and in particular the domestic banking sector, is highly susceptible to a further intensification of the eurozone sovereign debt crisis.

We expect the government to face increasing pressure to engage in more concerted fiscal consolidation over the coming quarters, particularly as lower growth begins to translate into lower government revenues. While France has thus far not fallen prey to the bond vigilantes like the peripheral countries of the eurozone, the country nonetheless 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 -0.3%, from a previous forecast of 0.4%, on the back of our expectations for a weaker household segment and slowing external demand.

In line with our recent downward growth revisions, we have downgraded our projections for France's fiscal deficit, and now forecast the government will miss its 3.0% of GDP target in both 2013 and 2014. We expect the budget deficit to arrive at 3.8% of GDP in 2013 and 3.4% of GDP in 2014, from a previous forecast of 3.5% and 3.0% respectively. In addition, we are seeing increasing risks that the government debt/GDP ratio is reaching levels that will begin to impinge on long-term growth.

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 keeps the risks to our fiscal deficits over the medium term firmly to the downside.

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