September 25, 2020

French recession seen less dire than expected at -8.7% in 2020 – central bank

PARIS, Sept 14 (Reuters) – France’s economy will contract in 2020 by less than expected only a few months ago as business activity and consumer spending bounced back after the country emerged from one of Europe’s strictest coronavirus lockdowns, the central bank said on Monday.

The forced closure of most shops, offices and cafes for nearly two months until May 11 plunged the economy into one the deepest recessions in Europe with an unprecedented 13.8% slump in the second quarter from the previous three months.

The central bank estimated in its quarterly outlook that activity was now back to running 5% below normal levels, which translated into a 16% surge in third quarter gross domestic product from the previous quarter.

That left euro zone’s second-biggest economy on course to shrink 8.7% for this year as a whole, by far France’s worst post-war recession but less than the 10.3% slump that had been expected in June, the Bank of France said.

The economy would rebound in 2021 with growth of 7.4% and 3.0% in 2022, which would mean activity would have recovered all lost ground since the outbreak by the first quarter of 2022.

In July, the central bank had expected the economy to rebound 6.9% in 2021 and 3.9% in 2022.

Consumer spending, traditionally the motor of the French economy, would recover close to pre-crisis levels in the second half of this year and the savings rate would return to normal level after peaking in the second quarter at 27.4% of disposable income as households could not spend extra cash during the lockdown.

The central bank estimated that the economy would shed 825,000 jobs this year, before creating 125,000 next year and 600,000 in 2022. The unemployment rate was seen peaking at 11.1% next year. (Reporting by Leigh Thomas; Editing by Toby Chopra)

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