French economy shrinks 8.3 per cent

PARIS (AFP/APP): The French economy shrank 8.3 percent in 2020 as the coronavirus outbreak plunged countries across Europe into their deepest recessions since World War II, statistics showed Friday as the prospect of another lockdown clouds the prospects for recovery this year.

The drop was less than the 9.0 percent expected by statistics office INSEE as well as the Bank of France, and much better than the government’s own forecast for an 11 percent contraction, in large part thanks to a surge in consumer spending in December.

Households splurged ahead of the holidays after the easing of a second nationwide lockdown to halt Covid-19 cases, with spending jumping 23 percent after an 18 percent slump in November.

As a result, GDP fell just 1.3 percent in the fourth quarter, less than the 4.0 percent expected by most economists.

“It’s surprising, because we had six weeks of confinement in the last quarter and three weeks of curfew” in much of the country, said Selin Ozyurt, an economist at the credit insurance and analytics group Euler Hermes.

The government deployed some 300 billion euros ($364 billion) in financial aid so laid-off workers could keep being paid during the lockdowns, and for emergency loans to struggling businesses, part of President Emmanuel Macron’s promised to avoid bankruptcies “whatever the cost.”

But cafes and restaurants have remained closed since October 30, and government officials warned this week that the nationwide 6:00 pm curfew had not really slowed a worrying rise in Covid cases, making a new lockdown likely.

“The first half of 2021 will again be weighed down by the likelihood of stricter health measures,” said Emmanuel Jessua, an economist at the Rexecode research institute.

He said full-year growth was unlikely to reach the government’s target of 6.0 percent, based on hopes for a successful vaccination rollout. “It’s really going to depend on whether or not schools are closed” as part of any new lockdown, Ozyurt said.

“If GPD falls again in the first quarter, it would be particularly worrying in terms of returning to pre-crisis levels by the end of 2022.”