The coronavirus epidemic is lasting and, in fact, the recovery of the French economy will be less strong than expected next year. The government acknowledged this on Tuesday, noting that growth will continue to be held back by the impact of the re-containment and the need to still maintain health restrictions for long months.
From now on, growth is expected at 6% next year against 8% previously, after a historic drop of 11% of GDP expected this year, announced the Minister of the Economy Bruno Le Maire during a press conference call .
This hypothesis is based on three health elements: “a slowdown in economic activity of around 12%” in November with the re-containment, “the maintenance of health rules in the coming months to prevent the resumption of the epidemic” and “that there would be no third confinement in France in 2021”, explained the minister.
Still long consequences in certain sectors
This new forecast will be incorporated into the finance bill for 2021, currently under discussion in Parliament. The minister considers this new forecast, which is in line with those of the European Commission (5.8%) and the IMF (6%), “sincere, prudent and responsible”.
“The temporality of the crisis has changed compared to the representation that one could have of it at the start, which was that of a considerable shock but one-off in the spring followed by a sharp recovery at the beginning and more gradual thereafter”, had estimated in the morning Julien Pouget, head of the economic department at INSEE. Faced with a weaker-than-expected economic recovery and the maintenance of health restrictions over time, certain sectors are likely to suffer the consequences of the crisis for a long time, such as hotels and restaurants or sports clubs.
In November alone, activity is expected to contract by 13% according to INSEE, but the drop is 60% for accommodation and catering and 40% for household services which include leisure activities. If the minister did not open the horizon of these professionals by evoking a reopening date, he assured that the government would extend its support.
A return to the level of activity before the crisis towards “2022”
These new resources will be incorporated into the finance law for 2021 but detailed later because the government is still working on it, said Bruno Le Maire. “We will adjust the state guarantee to demand,” he said, while he provides for a maximum of 3 billion euros for a total of 20 billion loans.
The same goes for aid to the most deprived, whose difficulties are accentuated by the crisis: “We will do what is necessary”, wanted to reassure the minister, citing the RSA. These measures will worsen the deficit and debt forecasts for 2021 but the new estimates will not be known until early December. Despite everything, Bruno Le Maire still hopes to return by 2022 to the level of activity before the crisis. But this return will be “postponed to the end of 2022”, he conceded. He is counting in particular on the stimulus plan to achieve this, despite criticism from the opposition and economists.