French central bank revises up 2018 growth outlook

General view of the financial district of La Defense seen from Paris, France, September 21, 2017. REUTERS/Charles Platiau

PARIS (Reuters) - France’s central bank on Thursday revised up slightly its 2018 growth forecast to 1.9 percent, after the French economy enjoyed its strongest growth in six years in 2017.

The Bank of France raised its estimate from 1.7 percent in its last forecast dating from December, after the data had shown that the economy grew 2.0 percent last year.

It said in update of its economic outlook that confidence indicators have held up better so far this year than it expected, joining the IMF, OECD and European Commission in raising their forecasts since the start of the year.

Next year, the central bank saw growth easing to 1.7 percent, down from 1.8 percent previously, as exports were expected to offer less of a tailwind next year due to a lagged impact from the euro’s strength. It left its 2020 growth forecast unchanged at 1.6 percent.

The outlook would particularly benefit the labour market, with the economy seen creating 185,000-200,000 net new jobs annually through the end of the decade and cutting the unemployment rate to 7.9 percent by the end of 2020.

That would be the lowest jobless rate since the end of 2008 as the global financial crisis was breaking, and it would also put President Emmanuel Macron within reach of a promise to cut it to 7 percent by the end of his term in 2022.

Against that backdrop, the central bank predicted French inflation would pick up slightly faster than it had previously thought.

It forecast that inflation would average 1.6 percent this year, boosted by higher energy prices and an increase in regulated tobacco prices. The inflation rate would then ease to 1.4 percent before picking back up to 1.8 percent in 2020.

Reporting by Leigh Thomas; Editing by Sudip Kar-Gupta