French economy projected to shrink by 9-10 percent in 2020

French economy projected to shrink by 9-10 percent in 2020
The second lockdown has lead economists to revise their forecast. Photo: AFP
France's central bank said on Monday it expects economic activity to decline between 9 and 10 percent this year, a bigger drop than previously forecast due to a new lockdown.

While the new confinement measures will deepen the recession, the Banque de France believes that they will be far less destructive than during the country's first lockdown earlier this year.

“Before the second wave, we thought the recession would be a little less than 9 percent, we think today that for 2020 as a whole it will be between 9 and 10 percent,” Banque de France chief Francois Villeroy de Galhau said on RTL.

The central bank had forecast in September that economic activity, or GDP, would decline by 8.7 percent this year.

But that was before the rapid rise in Covid-19 cases in France in October, which led the government to impose a second lockdown.

The bank estimated that the new lockdown will cost the nation's economy 12 percent of GDP compared to a normal week in November.

The Banque de France said economic activity was running 4 percent below pre-pandemic levels before the new lockdown was imposed at the end of October.

Restaurants, non-food retail and recreation activities are being hit the worst by the new restrictions which shut or tightly restricted their activities.

But the lockdown is somewhat less restrictive than the first with more businesses allowed to operate, and the 12 percent drop in November activity pales in comparison with 31 percent registered in April.

Businesses that are closed are permitted to operate 'click and collect', takeaway and online ordering this time around and the French government has said that online sales will not be taken into account when calculating how much financial aid a business is entitled to.

READ ALSO How you can support your local traders during France's second lockdown

“We've learnt together how to work while protecting workers,” said Villeroy de Galhau.

He noted that construction activity is continuing and public services remain open during this lockdown, while more companies have figured out how to continue operations using remote working.

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