Banque de France expects a record fall of around 10% of GDP this year. It will take until 2022 for the French economy to return to its pre-Covid-19 health crisis. This recovery can also be faster if a coronavirus vaccine is detected.
Following the closure during containment and the gradual restart, the French economy will take time to recover from the Covid-19 pandemic, the Bank of France warns. The institute expects a record fall of around 10% of GDP this year.
The “gradual” recovery began with the containment and which will result in a recovery in the economy from the third quarter will not suffice to avoid an unprecedented economic downturn this year.
Estimated at -10%, this forecast is close to the -11% expected by the government in the Third Amendment Finance Bill, which it will submit to the Council of Ministers on Wednesday.
A decrease in GDP of 15% for the second quarter
Then “2021 and 2022 would be years of clear but gradual recovery”, predicts Banque de France, with growth of 7% next year, then a 4% increase in GDP by 2022.
But “this strong apparent recovery would not return to activity levels in late 2019 before mid-2022,” warns the French central bank, the first public institution to publish financial forecasts for this horizon.
In fact, the French economy must restart from a historically catastrophic level. Following the decline in GDP of 5.3% in the first quarter, according to INSEE’s estimation, the economy should slump by about 15% in the second quarter, Banque de France forecasts. It is a little more optimistic than INSEE, which expects a 20% drop.
The outlook for unemployment will increase
The “essential” element of the recovery will be the pace of recovery in household consumption. “It is likely that the expected rise in unemployment and the global context of high uncertainty will continue to weigh on purchasing behavior,” Banque de France said.
With cumulative savings of around EUR 100 billion, household savings will exceed 22% this year and consumption will fall by 9.3%.
If the massive system of partial unemployment set up by the government will somewhat curb the impact of the crisis on employment and purchasing power this year, unemployment should reach more than 10% by the end of 2020, and climb to a peak above 11.5% in mid-2021, a level “above historical precedents”, projects the Banque de France.
And there again, it will be necessary to wait until 2022 to see it fall to 9.7%. Purchasing power should fall slightly by 0.5% this year before it starts rising again but at a much slower pace than activity.
Health situation under supervision
This entire recovery scenario is based on a sustained but controlled circulation of Covid-19 and an economy that adapts to health restrictions. And it does not take into account future stimulus measures that the government should take, both in its new adapted budget and in the stimulus package announced at the beginning of the school year.
This recovery could also be faster if a durable medical solution arrived in mid-2021, Banque de France notes. Or, conversely, much slower if the epidemic catches steam and once again introduces containment measures, she warns.