The Banque de France anticipates a decline in GDP of around 10% this year followed by a rebound of 7% in 2021. It is only in mid-2022 that the French economy will return to its end level. 2019.

The Banque de France anticipates a decline in GDP of around 10% this year.

These are forecasts quite close to those of the government. The Banque de France anticipates a decline in GDP of around 10% this year due to the containment due to the Covid-19 pandemic, while Bercy expects a drop of 11%. For central bank economists, this dark year will be followed by a rebound of 6.9% in 2021. However, this will not be enough for GDP to return to its pre-epidemic level. We would have to wait until mid-2022 for activity to return to that of the end of 2019. More than two years will therefore be necessary to erase the effects of the crisis.

Worse, according to economists, “The loss of activity would remain substantial at the end of 2022, in the order of 3 points” compared to what would have happened without the pandemic, that is, if GDP had grown at a normal rate. “This loss would partly reflect a deficit in demand but also a reduction in activity potential under the effect of the crisis”, they explain. Unemployment should indeed rise very quickly. By mid-2021, the country would have 1.15 million more unemployed people compared to the end of 2019. And the unemployment rate would peak in the first half of next year.

Very gradual recovery

In the second quarter of this year, containment should weigh on the national accounts and lead to a decline in activity of around 15%. But the recovery will be slow… For the following quarters, activity would be 10% lower in the third quarter and 7% in the fourth quarter of 2020 compared to a scenario without crisis.

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To avoid a cascade of business bankruptcies in the coming months, François Villeroy de Galhau, the governor of the Banque de France, insisted this Tuesday on France Info on the need for the State to provide equity capital to companies in difficulty. He estimates between 10 to 30 billion euros the sum that the public power will have to mobilize, with the private sector, to avoid a collapse of the productive system which would jeopardize growth for the years to come. He has also been opposed to tax hikes. “Overall, we must not repeat the mistake made by a certain number of European countries after the previous crisis, which is to quickly raise taxes after the crisis; because there we risk stifling the recovery ”, he said.

For the moment, it is the State which absorbs the shock and not households and companies, with the partial unemployment scheme, the various aids and public guarantees for loans to companies. Thus, the public administrations assume more than 60% of the loss of income of the nation, against only 15% for the households and 24% for the companies. The price of this “shock absorber” for the crisis is the increase in public debt, which will reach around 120 points of GDP at the end of 2020. “Collective wisdom really asks that we stay here” and did not exceed 120%, insisted on François Villeroy de Galhau, for whom this “Is very important for the confidence of those who lend us”.

100 billion euros more saved this year

One of the essential points of the recovery will be consumption. Indeed, prevented from consuming during confinement, French households saved. And it will continue. “The use of forced 2020 savings would remain very limited, due to the precautionary savings behavior that can be expected from a degraded and uncertain economic environment, lower incomes than before the crisis and rising unemployment ”, according to the Banque de France.

Economists thus estimate that “Household savings for the whole of 2020 would be 100 billion euros higher than our pre-crisis projections”. An astronomical sum that catches the eye. The goal is for this amount to be spent mainly on French goods and services, otherwise these expenses will inflate imports and widen the hexagonal trade deficit. And there it would be the jobs of our trading partners that would benefit. Not those in France.

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