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French economy picking up says Central Bank


Eiffel tower in Paris, France

Eiffel tower in Paris, France

Eiffel tower in Paris, France

The Bank of France forecast on Thursday that growth in the euro zone's second largest economy would start to pick up from this year onwards after three years of virtual stagnation.

The central bank predicted that growth would hit 1.2 percent this year before accelerating to 1.8 percent next year and 1.9 percent in 2017 - slightly higher than the government's own projections. Inflation would likewise rise from 0.3 percent this year to 1.4 percent next and 1.7 percent in 2017.

Driving the improvement were external factors, notably cheap oil and a favourable euro rate, combined with low euro zone interest rates and domestic factors including a recovery in French corporate margins.

"On a domestic level, the measures introduced to cut labour costs should also start to support activity via gains in cost competitiveness which will in turn boost exports, job creations and business investment," it said of reforms including tax credits to companies and cuts to employer social contributions.

"Profit margins have already begun to recover, and this, combined with a persistently low cost of debt and projected increases in the capacity utilisation rate, should help to stimulate business investment," it said.

The prospect of job creation will be welcome to President Francois Hollande's government after data earlier this week showed France's jobless total rose 0.7 percent to a fresh record high of 3.54 million people in April.

Hollande, already facing low popularity levels, has said he would not stand for a second term in 2017 if unemployment is not falling by then.