(Bloomberg) -- The French economy will grow 1.1% this year as a recovery in consumer spending helps to offset a continued decline in investment, statistics agency Insee said.
The forecasts offer mixed signals for France’s new government, which is due to present a 2025 budget later on Thursday that aims to rein in the country’s widening deficit.
Belt-tightening in the aftermath of surging inflation is a key factor behind a slump in tax revenues that has fueled France’s fiscal difficulties. While Insee’s forecasts point to an improvement in consumer spending, a slump in business investment that began in the fourth quarter of last year is expected to continue.
The budget, which is set to contain increased taxes for business, could further weigh on sentiment.
“Even if political uncertainty has declined a bit, the detail of fiscal measures is not fully known and the announcements could further change the behavior of economic agents, notably businesses,” Insee said.
The second half will see a growth boost from the Paris Olympics in the third quarter, followed by a weaker reading in the final three months of the year. Insee said the underlying pace of quarterly growth would on average be around 0.2%.
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