French GDP Edges Up in the First Quarter of 2003

The French economy rose slightly in the first quarter of 2003 in contrast to the economies of Germany, Italy and the Netherlands where growth declined. In Germany and the Netherlands,
the declines were the second in a row.

The rise in the French growth rate can be attributed in part to the tax cuts put into effect in the fourth quarter of last year. Income taxes were reduced by 5% and nine million workers who didn’t earn enough to pay income taxes received a one-time payment worth an average of 300
euros ($348). Private consumption expenditures rose 0.62% in the first quarter, the largest increase since the third quarter of 2001. Private gross fixed investment rose 0.35% in the first quarter after having declined throughout 2002. These increases together with a decline in imports were large enough to offset a decline of 0.69% in exports as the higher euro began to take its toll on the export trade.

The modest increase in French economic activity in the first quarter has not changed the
prediction of the European Union’s executive branch that the Euro-zone countries may fail to
grow in the next two quarters.