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French economy to contract over 10 percent in 2020

Christian Fernsby ▼ | June 10, 2020
The French economy, the eurozone's second largest, is on course to contract 10.3 percent in 2020 as the coronavirus pandemic had triggered the country's worst post-war recession, the Bank of France (Banque de France) said on Tuesday.
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In its monthly outlook, the French central bank estimated that "an improvement in health situation and adapting businesses to the new circumstances would make it possible to gradually reduce activity losses... even as the virus continues to circulate."

Topics: French

"A gradual rebound will follow over the next few quarters, as economic activity adapts to the new context. But on an annual average in 2020, the GDP (gross domestic product) would remain very strongly affected, with a decline of more than 10 percent," it said.

The bank estimated that the French GDP would contract by 15 percent in the second quarter of this year from the previous quarter, due to the heavy economic fallout of the strict anti-coronavirus lockdown.

The French economy fell 5.3 percent in the first quarter this year, after a drop of 0.1 percent in the fourth quarter of 2019, according to the quarterly accounts published in late May by France's national statistics institute INSEE.

In May, France had limited loss in its economic activities as it has started a gradual return to normalcy, but its performance remained at levels far below normal, the central bank noted.

As of the end of May, economic activity was operating at 17 percent below normal levels, better than the 32-percent loss recorded in the first two weeks of lockdown in March and then the 27-percent reduction in April. In June, the loss of activity would be less than 12 percent, the central bank suggested.

Based on "the assumption of gradual end of the crisis" and progress in lifting strict lockdown measures, the central bank forecast a return to pre-crisis levels only in 2022.

After a 10.3-percent contraction this year, the bank expected that boosted confidence of consumers and business leaders coupled with a decline in household savings rate would help the French economy grow by 6.9 percent in 2021 and 3.9 percent in 2022.

The unemployment rate could peak more than 11.5 percent in mid-2021 before gradually decreasing below 10 percent at the end of 2022.