The activity has been “gently” restarted in France since the end of the closure, said Wednesday, Insee, which forecasts a fall in GDP “of about 20%” in the second quarter and more than 8% for the full year. It would then be “the most significant recession since the creation of the national accounts in 1948”.
If activity has begun “cautiously but clearly” in France since containment began on May 11, gross domestic product (GDP) should still fall “by about 20%” in the second quarter and by more than 8% over “all year in an optimistic scenario,” INSEE on Wednesday.
The French economy is currently turning “about four-fifths of its pre-crisis level”, to two-thirds during its containment, the National Institute of Statistics says in a new business cycle.
“Economic activity in June may be about 14% lower than normal (after -25% on average in May and -35% on average in April),” estimates INSEE, suggesting a fall in GDP of about 20% in the second quarter, following the 5.8% decline noted in the first.
A return to normal takes “long months”
It would be “the most significant recession since the establishment of the national accounts in 1948”, the institute specifies, emphasizing that this forecast must be taken “with caution”, given the uncertainty over the recovery rate in the coming weeks.
A return to normal is likely to take “long months”, and even if activity returned to pre-crisis levels in July, French GDP would fall by 8% by 2020. This figure corresponds to the level of recession the government is considering this year.
“Still, such a rapid return to normal seems unrealistic. The overall impact of the 2020 health crisis will therefore certainly be greater than this figure,” INSEE said.
“After almost two months of slow motion, like in apnea, the French economy is trying to breathe. But it is resuming in a world that is no longer exactly the same as before the health crisis,” the institute adds.
Continued decline in household confidence
Since May 11, deconfinance has led to a resumption of activity in all sectors. This is -38% in construction (against -75% before May 11) and -24% in industry (against -38%).
Most notably, with the resumption of many businesses, household consumption experienced a “recovery” during the first week of closure, with a level just below 6% of its pre-crisis level (versus -32% in early May), although some only is partly due to deferred purchases, INSEE emphasizes.
In addition, the decline in the French household confidence index continued in May, but less markedly than during its historical depth in April during containment, INSEE noted.
The indicator, calculated on the basis of opinion balances (difference between the percentage of positive and negative responses), lost 2 points compared to April when it had dropped by eight points. It is thus 93 points below its long-term average (100), the institute says in a press release.
INSEE conducted its survey from April 28 to May 16, 2020, “that is, before the population containment was abolished on May 11 (…) while the April survey was collected. Fully during the containment,” he said.