After its shutdown during containment and its gradual restart, the French economy will take time to recover from the Covid-19 pandemic, warns the Bank of France. The institution anticipates a record drop of around 10% of GDP this year.

The "gradual" recovery started with the lifting of containment and which will result in a rebound in the economy in the third quarter will not be enough to avoid an unprecedented recession in the economy this year.

Estimated at -10%, this forecast is close to the -11% anticipated by the government in the third amending finance bill, which it will present to the Council of Ministers on Wednesday.

A 15% drop in GDP for the second quarter

After that, "2021 and 2022 would be years of clear but gradual recovery," predicts the Banque de France, with growth of 7% expected next year, then a 4% increase in GDP in 2022.

But "this strong apparent rebound would not return to the level of activity at the end of 2019 before mid-2022," warns the French central bank, the first public institution to publish economic forecasts by that time. 

Indeed, the French economy must restart from a historically disastrous level. After the 5.3% drop in GDP in the first quarter, according to the INSEE assessment, the economy should plunge by around 15% in the second quarter, predicts the Banque de France. It is a little more optimistic than INSEE, which expects a fall of 20%.

Unemployment forecast to rise

The "essential" element of the recovery will be the pace of the rebound 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," said the Banque de France.

With cumulative savings of around 100 billion euros, the household savings rate will exceed 22% this year and consumption will fall by 9.3%.

If the massive system of partial unemployment put in place by the government will somewhat slow down the impact of the crisis on employment and purchasing power this year, the unemployment rate should reach more than 10% at 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 descend to 9.7%. Purchasing power should fall slightly by 0.5% this year, before starting to rise again but at a much slower pace than activity. 

The health situation under surveillance

The whole of this recovery scenario is based on a persistent but under control circulation of the Covid-19 and an economy which adapts to health constraints. And it does not take into account future stimulus measures that the government should take, both in its new adjusted budget and in the stimulus package announced for the start of the school year.

This recovery could also be faster if a lasting medical solution arrived in mid-2021, notes the Banque de France. Or conversely, much slower if the epidemic picks up steam and again imposes containment measures, she warns.

With AFP 

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