The French economy will take longer than expected to recover from the health crisis. According to the latest forecasts from the Banque de France (BdF), published on Monday, gross domestic product (GDP) will rebound by 5% next year, after falling 9%.
“The hypothesis is that the epidemic would not end immediately and that the generalized deployment of vaccines would not be fully effective until the end of 2021”, which means that “the level of activity at the end of 2019 would not be recovered until mid- 2022 ”, explains the Banque de France in its latest macroeconomic projections. Thus, after the rebound next year, growth will continue at the same rate of 5% in 2022, before settling to a “less unusual” level slightly above 2% in 2023, forecasts the French central bank.
The second wave widened the gap
Three months ago, the BoF forecast a contraction of the GDP of 8.7% this year, before a recovery of 7.4% next year. But since then, France has faced the second wave of the Covid-19 epidemic, and the re-containment caused an 11% drop in activity in November from its pre-crisis level. And it should still be 8% below normal in December, while deconfinement will be slower.
The persistence of the epidemic at the start of 2021 should still constrain household consumption, even if it would recover markedly with the gradual lifting of health pressures during the year, estimates the Banque de France.
However, it will be necessary to wait until 2022 to see it return to its pre-crisis level, and perhaps even exceed it temporarily, while the recovery plan should support private and public investment. And despite the economic recovery, France is expected to experience a rapid rise in unemployment, the result of the difficulties accumulated by companies. It would reach a peak close to 11% in the first half of 2021, before falling to 9% at the end of 2022.
Faced with uncertainties about the evolution of the epidemic, the Banque de France also presents a more favorable scenario of a GDP rebound of 7% in 2021 if the health situation improves more quickly. Conversely, a more pessimistic scenario of still strong circulation of the virus would cause a further contraction of the GDP of 1%.
The government expects growth of 6% next year, after an anticipated contraction of 11% this year, when the OECD also anticipates a GDP increase of 6% in 2021, but after a recession of 9, 1% this year.