French Finance Minister hails “victory” as Q2 preliminary GDP beats forecasts

French Finance Minister Bruno Le Maire hailed the country’s forecast-beating second quarter preliminary economic growth as a “victory”, even as analysts said fears about a recession in Europe were growing due to rising inflation.

France, the euro zone’s second-biggest economy, posted preliminary gross domestic product (GDP) growth of 0.5% in the second quarter.

The preliminary figures, released by France’s INSEE statistics body, beat forecasts in a Reuters poll which had predicted 0.2% growth for the quarter.

“It’s a victory for the French economy in difficult times,” Le Maire told a news conference, adding it meant France would meet the government’s goal for 2.5% growth for 2022.

The French economy got a boost from exports, added INSEE, although analysts said near-term pressures remained in terms of inflation. Data on Friday showed that preliminary inflation for July stood at 6.8%.

France’s High Council on Public Finances (HCFP) also published a report on Friday which estimated that President Emmanuel Macron’s government was too optimistic about the economic outlook.

Le Maire refuted this, saying the government’s economic growth forecasts were “credible and serious.”

“Growth has been supported by increased exports, however, the underlying picture is less positive,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.

“Household consumption fell in the quarter, likely a result of increased fiscal prudence, while government spending also came off the boil. The overall data set is of course a relief but this has done little to completely erode recessionary fears,” she added.

Rabobank also said it still expected inflation to push the euro zone into a recession later this year.

“We still expect the euro zone economy to enter a shallow recession in the second half of 2022 to the first half of 2023, although the risks of a severe contraction due to an energy crisis have increased,” wrote Rabobank in a note.