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French central bank tweaks growth estimates higher, sees budget rule break

PARIS, June 9 (Reuters) - The French economy is set to grow slightly more than expected through 2019 thanks to stronger international trade, but is at risk of breaking its public deficit commitments, the central bank forecast on Friday.

Growth should pick up from an estimated 1.4 percent this year to 1.6 percent in both 2018 and 2019, the Bank of France said in its biannual economic outlook.

That was up from estimates in December for growth of 1.3 percent in 2017, 1.4 percent in 2018 and 1.5 percent in 2019.

While improving international trade would support activity, consumer spending would offer less support than in recent years as wage gains lagged behind higher inflation, the central bank said.

After inflation of only 0.3 percent in 2016 amid weak energy prices, it estimated consumer prices would rise 1.2 percent this year and next, and 1.4 percent in 2019. While the 2017 estimate was unchanged from December, the forecasts for 2018 and 2019 were trimmed slightly on expectations for weaker oil prices.

The central bank said that the public finances were on course for a deficit of 3.1 percent of economic output this year, falling short of the 2.8 percent expected by the previous government for this year.

That would mean France would miss the 3 percent EU deficit limit again even though the government of former president Francois Hollande had promised it would be respected this year for the first time in a decade.

While the current administration has said it would stick to that pledge, Budget Minister Gerald Darmanin told Le Monde newspaper on Thursday that reaching 2.8 percent was "too optimistic". (Reporting by Leigh Thomas; editing by Michel Rose/Jeremy Gaunt)