As a result of the coronavirus pandemic, the government now forecasts that French gross domestic product (GDP) will drop 6% this year with an explosion in the public deficit to 7.6%. This was announced on Thursday, April 9, the Ministers of Economy Bruno Le Maire and Public Accounts Gérald Darmanin in an interview with Les Echos.

"This is the biggest recession in France since 1945. Unknowns remain and this forecast may still evolve, especially with regard to the duration of confinement and the terms of exit," said Bruno Le Maire, who also tables on a "gradual" recovery.

This new forecast will be incorporated into the amending finance bill presented next week in the Council of Ministers. It will be examined immediately in Parliament.

Each week of containment weighs a little more on business activity and worsens the recession. This collapse of 6% of GDP would thus correspond to a confinement of two months, that is to say until mid-May, according to INSEE estimates.

An emergency plan raised to 100 billion euros

"The economic impact, it is massive, it is very negative, it is brutal and it will cause in France as everywhere in the world an economic shock that everyone imagines but of which nobody knows yet the totality of the impact", had warned Prime Minister Édouard Philippe on Wednesday.

To confront this unprecedented health and economic crisis, the President of the Republic has given the watchword: the government will support businesses and employees "whatever the cost".

Faced with the growing need for support from businesses, the government will more than double the 45 billion euros emergency plan announced last month.

It will increase to 100 billion euros, announced Bruno Le Maire, thus integrating more resources for partial unemployment - 20 billion instead of 8.5 billion initially provisioned - and the deferral of charges, now limited to the most difficulty.

The solidarity fund created for very small businesses sees its endowment go from 1 to 6 billion euros, to respond to the influx of requests and the relaxation of the conditions of allocation.

The urgency still being the health crisis, the envelope of "exceptional" expenditure for health passes, it, from 2 to 7 billion euros. In particular, it will finance the 4 billion euros in purchases of equipment promised by Emmanuel Macron and the revaluation of the salaries of nursing staff.

The draft revised budget also provides for bonuses for nursing staff and certain civil servants, the amounts of which are still "in arbitration".

Debt explosion

As a result of this recession and the strengthening of support measures, the public deficit will climb to 7.6% of GDP and the public debt will explode to 112% this year, warned the ministers.

"This debt meets an imperative: avoid corporate bankruptcies and the sinking of our economy," defended Bruno Le Maire.

This rectified budget, devoted to the emergency, does not yet include measures to revive the economy, with a view to emerging from the crisis.

But Bercy is already working on the economic aspect of the deconfinement strategy, which will be chosen.

The Minister of the Economy indicates that he "has started work with all the sectors" on "deconfinement methods for each of them".

However, he warns that the recovery will be "gradual", like what is happening in China. "The economic recovery will be long, difficult and costly," he insists.

Earlier Thursday, INSEE also estimated that the return of activity to its normal level "will take time".

With AFP

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