December 17, 2015 / 8:54 PM / 2 years ago

Economic impact of Paris attacks expected to be short-lived, INSEE says

French soldiers patrol in front of the Louvre Museum Pyramid's main entrance in Paris, France, as part of France's national security alert system "Sentinelle" after Paris deadly attacks November 27, 2015.Charles Platiau

PARIS (Reuters) - The attacks in Paris last month will weigh on French economic growth only briefly in the fourth quarter before France resumes more stable growth in 2016, the official statistics agency, INSEE, forecast on Thursday.

The euro zone's second-biggest economy will grow only 0.2 percent in the fourth quarter from the third, INSEE estimated, trimming its forecast from 0.4 percent.

The impact from the Islamic State attacks on Nov. 13 was projected to reduce fourth-quarter growth by 0.1 percentage points from fourth-quarter growth. Other factors, such as low energy production amid unseasonably warm weather, explained the rest of the revision, INSEE said.

Despite the weaker outlook for the fourth quarter, INSEE kept its full-year 2015 growth forecast at 1.1 percent, the best showing since 2011 and in line with the government's forecast for growth of at least 1.0 percent.

"That's the scenario that seems the most probable to us," INSEE's head of economic forecasting Vladimir Passeron told journalists. "Household spending and growth pulled back at the end of the year, but should hold up."

The economy will return to growth of 0.4 percent in the first and second quarters of next year, INSEE said, in its first estimates for growth in the new year.

Not only is consumer spending expected to rebound, but household investment, which consists primarily of real estate purchases, should pull out of a long-running slump that has been weighing on overall growth.

With oil prices low, annual inflation of 0.3 percent was forecast for the first quarter and 0.2 percent for the second quarter, helping underpin growth in consumer purchasing power.

INSEE calculated that low oil prices were giving the French economy an overall boost of 0.4 percentage points. Another 0.4 percentage points was coming from the European Central Bank's unconventional monetary policy.

As the economy's prospects improved, unemployment was expected to edge down from an 18-year high of 10.6 percent in the third quarter to 10.4 percent by the middle of 2016.

Reporting by Leigh Thomas; editing by Michel Rose, Larry King

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