* Q1 business investment slowed to 0.5 pct Q/Q
* Bank of France still sees annual investment of 4.1 pct
* Villeroy urges caution on heavy borrowing
PARIS, May 3 (Reuters) - A rebound in French business investment is to stay on track this year despite a slowdown at the start of 2018, the head of the French central bank said on Thursday.
French economic growth slowed in the first quarter to 0.3 percent from 0.7 percent in the previous three months in part due to slower business investment, the INSEE statistics agency said on Friday.
Bank of France governor Francois Villeroy de Galhau said that the drop in business investment growth to 0.5 percent was hardly surprising after particularly strong growth of 1.6 percent at the end of 2017.
“Beyond this quarterly slowdown, which is at the end of the day a rebalancing, what is more important is our full-year forecast for business investment (which) shows a strong dynamic,” Villeroy told a conference at the central bank.
The Bank of France forecast in March that business investment would grow 4.1 percent this year after expanding 4.4 percent last year.
The government of President Emmanuel Macron is counting on tax cuts and labour reform to help maintain business investment momentum after last year’s rebound.
The recovery in investment has coincided with a surge in corporate borrowing with growth in bank loans to businesses running around six percent in recent months.
Villeroy said that credit growth at such rates called for caution and said that regulators would look next month at whether new measures were needed to rein them in. (Reporting by Leigh Thomas Editing by Ingrid Melander)