The French economy expanded at its slowest rate in a decade in 2003 but the government said things were picking up and that growth could hit two or even 2.5 percent this year.
The economy grew 0.5 percent in the final quarter of 2003, official figures showed on Thursday. The quarter-on-quarter rise, below expectations, took growth rate for 2003 as a whole to a paltry 0.2 percent, the lowest since a contraction in 1993.
In another report, statistics office INSEE said industrial output in December rose 0.3 percent month-on-month, which was short of the 0.5 percent forecast by economists.
Economists said both sets of figures were respectable despite falling a bit short of expectations.
"GDP growth in the fourth quarter and 2003 is a positive sign reinforced by the industrial production figures," said CCF economist Nicolas Claquin. "Indicators are still fragile but we are optimistic for 2004.
The news on France, the euro zone's second largest economy, came on the heels of German data showing growth there was 0.2 percent quarter-on-quarter in the last three months of 2003. France and Germany account for around half the output of the 12-nation euro zone.
The GDP reports reinforced recent evidence of a moderate recovery taking hold in the two leading euro zone economies, although the German growth rate was also lower than expected.
Emmanuel Ferry, economist and investment house Exane, said France did well to grow 0.5 percent in the final quarter when growth in Germany, its biggest trading partner, was weaker.
"It's a relative surprise that growth was as strong in Q4," Ferry said. "It's astonishing because German growth has been much weaker in the same period."
MORE DEFICIT TROUBLE? France's growth of 0.2 percent for 2003 fell short of a 0.5 percent level on which the government based a pledge to rein in its public deficit. France is already set to bust the EU's deficit limits for the third year running in 2004.
EU Economic and Monetary Affairs Commissioner Pedro Solbes warned on Tuesday that France could miss the target to cut its deficit to within EU limits in 2005 with weak growth in 2003.
However, cabinet spokesman Jean-Francois Cope told Europe 1 radio that growth could reach "two or even 2.5 percent" in 2004, compared to an official forecast of 1.7 percent.
Higher growth would boost state tax revenues, easing some of the pressure on public finances.
The Bank of France gave a somewhat less upbeat assessment of immediate growth prospects, cutting its forecast for growth in the first quarter of 2004 to 0.5 percent from 0.7 percent. It said output in industry was likely to pick up in all sectors in the coming months.
Growth in France has been held back by persistently high unemployment, which rose to 9.7 percent in December. Worried about joblessness, consumers have held off on spending.
Carmaker PSA Peugeot Citroen said on Wednesday it expects French car sales, which were already weak in 2003, to be weaker still in 2004 as the French keep saving. Rival Renault expects the French market to grow about one percent.
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