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German, French central banks ease growth expectations

German, French central banks ease growth expectations

(6 June 2016 – Europe) Germany will grow at a slightly slower pace than previously expected, its central bank predicted last week, amidst softening forecast expectations.

The Bundesbank said the German economy would expand by 1.7 percent this year, slowing to 1.4 percent in 2017, a downgrade of prior forecasts of 1.8 percent and 1.7 percent respectively.

Nevertheless, the bank's chief, Jens Weidmann, said the German economy stood on a "relatively firm" footing.

According to the bank, 2018 would see a higher growth rate of around 1.8 percent.

Exports, the cornerstone of Germany’s economy, are providing a "limited" push but "should pick up" in coming years, Weidmann said.

Inflation is expected to remain subdued this year, the Bundesbank said, with consumer prices rising by just 0.2 percent, increasing to 1.5 percent next year and 1.7 percent in 2018.

On Friday, the Bank of France repeated its earlier predictions of 1.4 percent growth for Europe’s second largest economy. However, it too cut its outlook for 2017 to 1.5 percent from 1.6 percent earlier. Growth of 1.6 percent would now only be achieved in 2018, it said.

The central bank said the international environment had become "less favourable" for French growth, and also cited expectations of higher oil prices as a negative factor for expansion.

France's trade deficit, partly explained by a strong Euro, was also weighing on gross domestic product (GDP), it said.

Limited growth was expected to lead to an equally limited increase in jobs, with employment levels likely to rise by 0.7 this year and 0.6 percent next year, the Bank of France said.

The French unemployment rate, a key focus for the government, will ease to 10.1 percent this year from 10.3 percent in 2015, and fall below 10 percent only in 2018, the Bank of France predicted.

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