Bad news is piling up. While the country is benefiting from its deconfinement, the news is now punctuated by the great difficulties that many companies are going through. And, as might have been feared, this context of crisis should last.
Thus, the French economy should plunge by about 10% this year, despite a "gradual" recovery in activity from the third quarter, according to an estimate published Tuesday by the Banque de France. It also judges that the GDP will not return to its pre-crisis level before mid-2022. This forecast is also close to that of the government which anticipates a recession of 11% this year.
After the “very strong shock” caused by containment, with in particular a fall in gross domestic product (GDP) estimated at 15% in the second quarter, the economy should rebound by 7% in 2021, then increase again by 4% in 2022 , predicts the French central bank. "This strong apparent rebound would not make it possible to return to the level of activity at the end of 2019 before mid-2022," said the Banque de France, however.
French households are fearful
This scenario is based on a persistent but controlled circulation of Covid-19 and an economy that adapts to health constraints. According to the central bank, its forecasts remain dependent on many uncertainties, and the "trade-off" between savings and consumption will be "essential for the pace of recovery".
It is "likely that the expected rise in unemployment and the global context of high uncertainty will continue to weigh on purchasing behavior," she said. It thus forecasts that the household savings rate will exceed 22% this year and that consumption will fall by 9.3%.
With weakened margins and slower activity, companies would reduce their investments by 23.3%. These difficulties will "cause a significant reduction in employment", but in a slightly time-delayed manner as the government reduces the massive partial unemployment scheme put in place in March.
Unemployment rate at 11.5% mid-2021
Thus, the unemployment rate would rise to more than 10% at the end of 2020, and would climb to a peak higher than 11.5% in mid-2021, a level "above historical precedents", projects the Bank of France. And we would have to wait until 2022 to see it go back down to 9.7%.
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Overall, if overall household income is going to fall due to these economic difficulties, it is the State and public administrations which will shoulder the brunt of the shock of the crisis, underlines the BoF. In terms of price level, it anticipates downward pressure, with inflation which could even become negative at the end of 2020, mainly due to energy prices, then remain below 1% until at the end of 2022.
