French economic growth will accelerate gradually in the coming years from 1.2 percent this year, although not as fast as previously estimated, the Bank of France forecast on Friday. The euro zone's second-biggest economy is on course to grow 1.4 percent in 2016 and 1.6 percent in 2017, the central bank estimated, trimming forecasts from 1.8 percent and 1.9 percent respectively six months ago.
The benefits of a weaker euro on the economy and low energy prices on household purchasing power should fade somewhat in the coming years, the Bank of France said. However, the outlook was clouded by a number of factors, not least November's shootings and suicide bombings by Islamist militants who killed 130 people on November 13.
"While the impact of the November 2015 terrorist attacks is likely to be transitory and limited, there is a risk of a temporary fall in confidence among economic agents, which could affect their investment and consumption decisions," the Bank of France said in a twice-yearly outlook for the French economy. Against that backdrop, it said that inflation was now expected to be weaker than previously thought, forecasting a rate of only 0.1 percent this year, followed by 1.0 percent in 2016 and 1.5 percent in 2017.
Moreover, the risks to that outlook were skewed to the downside in light of persistently high unemployment, which hit an 18-year high of 10.6 percent in the third quarter, data on Thursday showed. Despite a weaker growth outlook, the Bank of France estimated that the government could meet its EU public deficit target of 3.0 percent of economic output in 2017 as long as it kept up efforts to rein in spending.