PARIS (Reuters) - The French central bank trimmed its economic growth outlook on Tuesday as demand from trading partners for exports weakens and consumers save extra income rather than spending it.
The Bank of France forecast the euro zone’s second-biggest economy would grow 1.3% this year and 1.4% next year, down from estimates in March of 1.4% and 1.5%, respectively. It kept its 2021 forecast at 1.4%.
Slowing global trade growth had darkened the outlook since the central bank’s last forecasts with demand for French products and services notably weaker from China, Germany and Italy.
Meanwhile, consumers were saving more than expected as they benefit from extra income coming from government measures aimed at boosting household purchasing power, the central bank said. [nL8N23521Y]
Facing weekly waves of protests against economic policies viewed as overly pro-business, President Emmanuel Macron announced in December concessions worth more than 10 billion euros ($11.3 billion) to lift the earnings of the poorest workers and pensioners.
He followed up in April with a promise cut income tax by 5 billion euros from next year, which the Bank of France has not yet taken into account in its forecasts.
The central bank said households had squirreled away about two-thirds of the income gains already reaching them because the measures targeted specifically the poor, who it said had less of an inclination to spend than the rich.
However, over time households were expected to ease back on their savings and the income gains were expected to fuel higher spending from next year.
($1 = 0.8838 euros)
Reporting by Leigh Thomas; editing by John Stonestreet