Recovery plan of 100 billion euros: in what state is the economy in France?

French Prime Minister Jean Castex and Minister of the Economy Bruno Le Maire, at the Élysée Palace, August 26, 2020. Charles Platiau / Reuters

Text by: Patricia Lecompte

4 min

The French economic stimulus plan was to be presented on August 25. But the executive preferred to postpone it in order to devote itself to managing the health crisis. Due to a resurgence of the coronavirus epidemic, back to school has become a priority. It is therefore Thursday, September 3 that the government will unveil in detail its recovery plan of 100 billion euros, intended to support the economy damaged by the Covid-19. A few days before his presentation, what is the economic situation in France?

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Since the start of the health crisis, economic indicators in France have turned into the red. They show the violence of the economic crisis caused by the coronavirus epidemic. According to figures published by INSEE, the gross domestic product (GDP) of France suffered a dizzying fall: it fell by 13.8% in the second quarter. This is its strongest contraction on record since World War II.

While a rebound is expected for the third quarter, 2020 will continue to be marked by the cessation of growth and a historic recession. The Minister of the Economy, Bruno Le Maire, confirmed, Monday, August 24, the government's forecast for this year of a GDP contraction of 11%, while INSEE expects a decline of 9%.

►Also read: Economy: France bounces better than other countries, according to a study

Public debt soared, deficits widened

The recession caused by the Covid-19 pandemic is also having an impact on public finances. France's public debt could reach 121% of gross domestic product this year. By comparison, it was 98.1% at the end of last year. This surge is due to the intensification of state aid to businesses and the self-employed in order to limit damage. In the third amending finance law 2020, the amount of support measures amounted to 136 billion euros.

As for the public deficit, for this year, it should stand at 11.4% of GDP. Another consequence of the pandemic on the economy: France's trade deficit has widened. Due to the coronavirus, world trade has slowed down, which has led to a sharp drop in exports and imports in France.

Times are going to be tough on the job market

On the employment side, the situation is worrying. The number of job seekers remains high, although unemployment figures for July indicate a slight upturn in activity. According to INSEE, the coronavirus has already destroyed 600,000 jobs in the private sector. Thanks to partial unemployment, financed by the State, the unemployment rate remained in the second quarter at 7%. But we will have to wait for the figures for the third quarter to really measure the losses.

Pôle emploi published its figures for the month of July on Wednesday August 26. While they show a decrease in registered unemployed job seekers, they also indicate more partial unemployment, which suggests a resumption of short contracts. All categories combined, there were 45,000 fewer unemployed in July. A figure to be moderated because in September there will be at least 700,000 young people who will enter the job market. In addition, the month of July saw an increase in unemployed unemployed people who are not forced to look for a job because they are either in training, or on a professional security contract, or on sick leave. In view of the economic deterioration, the government expects a sharp increase in job seekers from the start of the school year.

The social back-to-school period promises to be complicated for disaster-stricken sectors of activity such as tourism, hotels, airlines, the automotive and aeronautical industry, clothing and even culture, a sector for which the Prime Minister, Jean Castex, has just announced aid of 2 billion euros. Rare positive point in this gloomy picture: during confinement, the French saved 55 billion euros. A hoard that could contribute to economic recovery, provided that the French want to consume well.

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  • Economy
  • Economic crisis
  • Employment and Work
  • Jean Castex
  • France

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