the French economy in free fall in the first quarter

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Under the shock of the coronavirus epidemic and a general containment which put the country practically shut down, French gross domestic product (GDP) fell by around 6% in the first quarter, plunging France into a recession of historically unprecedented magnitude. The estimate published Wednesday April 8 by the Bank of France specifies that it is the worst quarterly performance of the French economy since the end of the second world war.

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Negative growth in 2020

“You have to go back to 2e quarter of 1968, marked by the events of May, to find a fall in activity of the same order of magnitude “, underlines the conjuncture note. At the time, GDP fell by – 5.3% before rebounding in the following quarter by + 8%.

This time, the scenario that is emerging is more worrying. “April will be at least as bad as the last fortnight in March. Growth will be strongly negative in 2020 “, has already warned the Governor of the Banque de France, François Villeroy de Galhau.

Cautious in the face of uncertainty over the duration and extent of the economic shock, the French central bank does not risk an annual forecast, but warns that each fortnight of containment could “Cut the level of annual GDP by almost – 1.5%”.

→ READ. Coronavirus: INSEE estimates that economic activity has fallen by 35%

In late March, INSEE made the same calculation, suggesting a contraction in GDP by six points over the year if the confinement lasted two months. However, it is increasingly likely that the government will extend beyond April 15 the cessation of activity and traffic restriction measures implemented since Tuesday, March 17, at noon.

A virtual economic paralysis of the country

If these measures, it seems, helped to curb the spread of the virus, they also led to a virtual economic paralysis of the country. The survey carried out by the Banque de France on a sample of 8,500 companies allows us to take the exact measure.

“If the downward movement is general, and most often brutal”, says the study, its magnitude is uneven across sectors. The only relatively spared are those in agriculture and the agri-food industry, energy, financial services and the non-profit sector.

On the other hand, in industry, on March, the number of exceptional closing days was 5 on average. This has resulted in a drop in the capacity utilization rate from 78% in February to 56% in March, never seen in a long time. This drop in activity particularly affected the automotive, metallurgy and machinery and equipment sectors.

Keeping businesses afloat

In market services, the number of days of forced closure is even greater, 6 on average, but with notable differences between the very affected sectors, notably catering and construction, and business services which have held up better, without doubt thanks to telework.

In total, the Banque de France estimates that “Loss of activity over a typical week of confinement” is 32% in the overall economy. With, as a consequence, a marked deterioration in the cash position of companies, especially SMEs.

To keep them afloat, the government has already mobilized, without counting, hundreds of billions of euros through various devices: deferral of tax and social charges, partial unemployment, loans guaranteed by the state, solidarity fund for the self-employed . But if the confinement were to last, this might not be enough to avoid the sinking which threatens the most vulnerable.



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