The French economy is likely to contract by 3.0 per cent this year, twice the previous forecast amount, a source close to Economy Minister Christine Lagarde said on Monday. The economy would then rebound and grow by 0.5 per cent in 2010, the source said. In announcing budgetary measures in March, the government had said it expected the economy to contract by 1.5 per cent this year and to recover gradually in 2010 when gross domestic product would grow by 1.0 per cent.

In 1975, after the first so-called oil price shock that serves as a reference point for European economies since World War II, the French economy shrank by 1.0 per cent.

The source said that economic activity should pick up at the beginning of 2010, as the effects were felt of policies by central banks and governments to support economies. Household consumption, which is the main force behind growth of the French economy, should “hold up in principle” and remain steady in the next few months to show growth of 0.3 per cent this year and 0.7 per cent in 2010, the source said, giving credence to a report in the newspaper Le Figaro.