UPDATE 1-French economy ends 2025 with modest growth slowdown

* Q4 growth eased to 0.2% as inventories dragged activity

* Trade boosted growth while political uncertainty lingered

* Full-year 2025 up 0.9%, topping government's 0.7% forecast

(Updates adding details, ‌background, quotes) PARIS, Jan 30 (Reuters) -

France's economy grew modestly in the fourth quarter of 2025, slowing after a strong summer rebound as slightly softer domestic demand and a ⁠rundown in business inventories weighed on activity, preliminary data from the INSEE statistics office showed on Friday. Quarterly growth eased to 0.2% from 0.5% in the third quarter when the euro zone's second-largest economy surprised on the upside. The ​fourth-quarter reading matched both INSEE's forecast and economists' expectations, according to a Reuters poll.

Over the course of 2025, ‍the economy expanded 0.9%, outperforming the 0.7% assumption used in government budget planning. The stronger-than-expected performance increases the chances that the fiscal deficit will come in slightly below the 5.4% of gross domestic product that is currently projected. The economy held up better than many ⁠forecasters ‌had anticipated, despite months of political ⁠turbulence in a deeply divided parliament that weighed on sentiment among households and companies.

"We're off to a good start in 2026," Finance ‍Minister Roland Lescure said on TF1 television. "I hope we'll get at least the 1% (growth) we're expecting." Some political uncertainty is expected ​to ease as Prime Minister Sebastien Lecornu prepares to push the 2026 budget through parliament on Friday, ⁠ending a protracted standoff over fiscal policy.

Opposition parties are expected to file no confidence motions against his government, but they are unlikely to ⁠pass. Prospects for a strong rebound remain limited, economists say. The budget "remains unfavourable to businesses" and higher taxes could curb investment and job creation, ING economist Charlotte de Montpellier said in a note.

She described the overall ⁠outlook as "modestly positive," citing early signs of improving business confidence, though a strong euro could hinder exports. In the fourth ⁠quarter, household spending and ‌investment boosted overall domestic demand, which contributed 0.3 percentage points to the growth rate.

With exports growing and imports falling, foreign trade added 0.9% to the growth rate while ⁠a drawdown in corporate inventories subtracted 1%.