France's ailing economy will not grow as predicted by the government this year but will contract by 0.1 percent, the usually-reliable National Statistics Institute (INSEE) said early Friday. The contraction came after zero growth in the French economy in 2012.
In its latest overview of growth potential and other indicators, INSEE forecast choppy waters for France over the next seven months, despite a modest uptick in Gross Domestic Product in the current quarter.
France is currently in recession after two successive quarters of negative growth and will remain in recession for the remainder of the year, the latest report said.
In addition to a GDP contraction this year, INSEE said that high unemployment levels here would get worse, with average jobless rates rising to 10.7 percent officially, up from 10.4 percent in May. There are currently more than 3.2 million people out of work in France.
Nonetheless, INSEE said it saw "a timid brightening" on the horizon for France towards the latter part of the year.
Nonetheless, consumer confidence is expected to remain weak, with spending continuing to contract.
Household consumption, along with exports, is one of the pillars of French growth and the economy has been hit by internal drops in demand and external weakening of demand for French goods as the global economy has slowed.
Skittish consumers, spooked by the jobless rate and the weaker economic performance, are forecast to increase savings rates as a precaution and build on already substantial reserves.
France has one of the highest savings rates in the world at around 17 percent of income.