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By Francois Murphy
PARIS, Feb 12 (Reuters) - France’s economy shrank at the fastest pace in 34 years in the fourth quarter of 2008 as business investment and exports collapsed, prompting the government to say it expected negative growth this year.
National statistics office INSEE said on Thursday gross domestic product fell 1.2 percent in the last three months of last year compared with the previous quarter, more than expected, bringing economic growth for 2008 to 0.7 percent.
Economists had predicted a quarterly fall of 1.1 percent after growth of 0.1 percent in the third quarter.
“This bad figure reflects in large part a very significant destocking by companies, which indicates a wait-and-see attitude in the face of uncertain growth and the crisis in the automobile sector,” Economy Minister Christine Lagarde said in a statement.
The figures were published a day early after a group of statisticians leaked them in protest at the government’s early announcement of some statistics.
The announcement by the euro zone’s second biggest economy came a day before fellow heavyweights Germany and Italy were expected to announce their own steep GDP falls, and it followed a similarly grim statement by Spain.
Spain’s economy shrank 1 percent in the fourth quarter, its biggest quarterly fall in 15 years, pushing it into recession for the first time since 1993.
Lagarde said she expected GDP to fall by at least 1 percent in 2009 but took heart from the fact that household consumption, a key driver of French growth, had held up in the last quarter of 2008, rising 0.5 percent.
French President Nicolas Sarkozy has struggled to convince a sceptical public that he has chosen the right strategy to fight the economic downturn sparked by the global financial crisis.
More than 1 million people took to the streets this month to protest at his economic policies, which favour public investment in projects such as building roads and modernising train lines rather than giving more help directly to consumers.
Sarkozy made a live television appearance last week to try to win support for measures including his 26 billion euro ($33.16 billion) stimulus plan but polls have shown his approval rating has fallen since then.
Much of the GDP data published on Thursday will heighten fears about the state of the economy.
“The fourth-quarter contraction is the worst since the fourth quarter of 1974, after the first oil shock,” BNP Paribas analyst Dominique Barbet said.
Business investment fell 1.5 percent in the fourth quarter while public investment dropped 1.6 percent. Exports tumbled 3.7 percent and imports slid 2.2 percent, while stocks declined by 0.9 percent, data showed, confirming grim news from companies.
France has announced it will provide 6 billion euros in loans to its carmakers Renault and PSA Peugeot Citroen, which have been hit hard by the slowdown and complained of draconian credit conditions.
Peugeot said on Wednesday it expected to remain in the red until 2010 after spending nearly 1 billion euros to slash stocks of unsold cars last year and on Thursday Renault scrapped its 2009 profit targets, dropped its divided and slashed output.
There were, however, some bright spots in the French data.
“The breakdown comes as a real surprise,” Barbet said, citing the robust household consumption figure.
“Other components of domestic demand also slightly exceeded expectations, housing down only 0.3 percent quarter on quarter and business investment down 1.5 percent,” he said.
Lagarde said France, like its neighbours, had suffered in the downturn at the end of last year, and highlighted the fact that French economy grew in the third quarter, a better performance than many western European countries. (Additional reporting by Anna Willard and James Mackenzie)