France slashed its forecasts for economic growth and inflation next year and conceded it would overshoot the European Union's deficit limit, bringing its economic outlook closer into line with market expectations.
In a widely anticipated move, Economy Minister Christine Lagarde said the euro zone's second-biggest economy would grow by between 0.2 per cent and 0.5 per cent in 2009, dramatically down on the 1 per cent expected previously.
Ms Lagarde also lowered the growth forecast for 2010, saying it was expected to hit 2 per cent instead of the 2.5 per cent seen earlier. Analysts have been expecting France to revisit its economic outlook given a deterioration in global growth and the world financial crisis.
On Friday, the European Commission lowered its forecasts for French economic growth to zero in 2009 and only 0.8 per cent in 2010.
"We did have a very weak forecast of one percent, the weakest in 24 years, we are revising it to between 0.2 and 0.5 per cent," Ms Lagarde told the upper chamber of parliament.
"We are also revising our forecast for 2010 to 2 per cent from 2.5 per cent," she said.
Prospects for the country's budget deficit also dimmed after Budget Minister Eric Woerth raised the deficit forecast for 2008 to 2.9 per cent of gross domestic product (GDP) from the 2.7 per cent seen originally.
The deficit would breach the EU's limit of three percent of GDP in 2009 - when the government sees the deficit at 3.1 per cent - before easing back to 2.7 per cent of GDP in 2010, 1.9 per cent in 2011 and 1.2 per cent in 2012, Mr Woerth said.
Ms Lagarde also altered expectations for inflation, saying that it would run at a rate of 1.5 per cent next year rather than the 2 per cent seen previously.
Reuters