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Yesterday's press conference did not change our expectation of more monetary easing in 2014, although when and how exactly the ECB delivers is still difficult to predict. An enhancement of forward guidance is likely, in our view, to come alongside a calibrated v-LTRO to reduce credit fragmentation. A (small) cut in the Refi rate cannot be ruled out if growth or inflation disappoints.
The nascent recovery in France is not a strong rebound. Our growth potential has been adversely affected by the recent crisis, and in particular by its length, which has had an impact on human and physical capital and on productivity. We should not overestimate the impact, however, as some of the observed fluctuations are cyclical, with no effect on our potential. A number of measures have also been implemented to enhance the outlook for economic activity.
The ECB delivered a surprise 25bp cut in the Refi rate while keeping the deposit rate at 0%. The main fundamental justification for this early move was the risk of “a prolonged period of low inflation”, although the balance of risks to price stability was not formally shifted to the downside. December staff forecasts and the evolution of inflation expectations will be pivotal to assess the next ECB move, if any.
Sub-Saharan Africa's economies have enjoyed strong growth in recent years, with average annual GDP growth of 4.8% since 2007. The countries form the world's second fastest growing region, after South East Asia. Perceptions have changed between 2000, when Africa was considered "the hopeless continent" synonymous with war, famine and AIDS, and today's view of a "Rising Africa" capable of being a future driver of global growth — with rising domestic consumption, foreign direct investment (FDI), and stronger democracies.
The correction on the housing market that began in 2012 is still modest for the time being, unlike most European countries. On the one hand, economic stagnation, fiscal measures and overvalued prices have driven demand down, while on the other, the fundamentals of housing demand are stopping any marked downward spiral from getting underway.
French Macro Prospects - Edition November, 2013
France: workforce, employment and unemployment
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