IMF downgrades French economy forecast

The International Monetary Fund (IMF) has downgraded its forecast for the French economy this year and the next and says it will be difficult to reverse the rise in unemployment by the end of the year.

François Hollande has promised to bring down unemployment by the end of this year Reuters/France2

France’s GDP will contract by 02 per cent this year and grow 0.8 per cent in 2014, the IMF predicted on Tuesday, scrapping its previous prediction of 0.1 per cent contraction in 2013 and 0.9 per cent growth next year.

France went into recession this year with a decline in GDP in the last quarter of 2012 and first quarter of 2013.

"Following two quarters of negative growth economic activity should begin to recover in the second half of 2013, driven by a gradual improvement in the external environment," the IMF said.

But it claimed there were “significant rigidities” in the French economy that hampered growth and job-creation.

And IMF France mission chief Edward Gardner predicted that "it will be hard to reverse this rise by the end of the year", as President François Hollande has promised.

The employment service on Tuesday announced that 2,762,900 people now receive unemployment benefit, a one per cent rise in April and an 8.5 per cent rise over a year.

After an unbroken two-year rise, the jobless total in metropolitan France now stands at 3.26 million.