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ECONOMY

French economy outpaces Britain as recovery is confirmed

The French economy clocked up solid growth in the third quarter, official data showed on Tuesday, suggesting that recovery in the eurozone's second-biggest economy remains on track.

French economy outpaces Britain as recovery is confirmed
AFP

The national statistics institute INSEE said in a statement that gross domestic product (GDP) expanded by 0.5 percent in the three months to September.

The French economy had already grown by 0.6 percent in the second quarter and 0.5 percent in the first quarter of this year.

That means that France's economy has grown for the fifth quarter in a row. Over the last 12 months France's economy has grown by 2.2 percent, the healthiest rate since 2011.

Reuters news agency had this to say: “Following the economy’s performance over the first nine months, President Emmanuel Macron’s government should have little trouble surpassing the 1.7% growth forecast it built its budget plans on.”

And significantly that 12 month growth rate is higher than in the UK where the economy has grown by 1.5 percent over the last 12 months. Britain's economy expanded by 0.4 percent in the third quarter of 2017.

 

The third-quarter data are in line with the government's forecast for growth of 1.8 percent over the year as a whole.

Economic activity in the period from July to September was driven by a pick-up in household consumption and rising investment, INSEE said.

 

With the French economy having expanded at around a tepid 1.0 percent rate in recent years, an acceleration to 1.8 percent growth would represent a considerable improvement.

Business surveys have shown a new sense of optimism in the French economy since the election of Emmanuel Macron as president in June, and his government has pushed through a labour reform which it hopes will spur further activity.

Insee sees business investment accelerating to a 3.9 increase this year, from 3.4 percent in 2016.

Households are also expected to increase their investments by 5 percent this year, the highest rate since 2006.

Earlier this month Macron was also given some welcome news in the form of a steep drop in the unemployment rate.

READ ALSO: Brexit and Macron: Why the time was right to leave London for Paris

 

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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