Eight-week confinement in France to fight the coronavirus epidemic will result in 120 billion euros lost for the activity, while "forced savings" will reach 55 billion euros, according to a published study Monday by the OFCE. "During the containment period, gross domestic product (GDP) is reduced by 32%", corresponding to five points of GDP over the whole of 2020, specifies the French Observatory of Economic Conditions.
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60% of the drop in income absorbed by public administrations
"Nearly 60% of the drop in national income is absorbed by public administrations" through the increase in the deficit, while "35% is on the account of businesses, which raises the question of the rebound after the episode of confinement" , according to this study.
The resumption of activity will depend very much on the resumption of consumption, namely to what extent the French will spend what they have saved during confinement or will build up precautionary savings.
9 billion euros less income for households
For the OFCE, "the contribution of eight weeks of confinement to the evolution of the public deficit would be 2.8 points of GDP, or 65 billion euros", but if all of this savings were consumed, this would not would be only 20 billion euros, or 0.9 point of GDP. In this case, the annual loss of activity would be reduced to 2 points of national income instead of 5.
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But faced with the uncertainties about the end of the crisis, "the accumulated savings may not be consumed completely and quickly," notes the study. Especially since "households would see their income reduced by 9 billion euros" during confinement.
France's GDP to decline by 8%
Also, "the restrictions that persist, especially on the movement of people, could have massive sectoral impacts" and there could be "costly adjustments in unemployment", still estimates the OFCE. Finally, "the eight weeks of confinement would reduce the margin rate for companies by 2.9 points of added value over the year, the equivalent of a loss of 35 billion euros".
The government estimates that the GDP of France will decline over the whole of 2020 by 8% under the effect of the economic shock caused by the coronavirus, which will not be limited to the eight weeks of confinement. It also forecasts a surge in the public deficit to 9% of GDP for this year.