ECB’s Villeroy Says French Recovery May Be Better Than Expected

(Bloomberg) -- Bank of France Governor Francois Villeroy de Galhau said the country’s economy is picking up faster than expected and that forecasts from the International Monetary Fund may be too gloomy.

“Things are going at least as well as we forecast at the start of June, and even a bit better,” Villeroy said on French television channel LCI, citing the central bank’s monthly indicator of business activity.

Villeroy has compared the economic recovery to the shape of a bird wing, with a sharp upturn as confinement measures ended, followed by a steady return to the pre crisis level of output.

The contraction in 2020 may not be as sharp as the 10% decline the Bank of France forecast last month, Villeroy said, noting that the government forecasts -11% and the IMF -12.5%.

How quickly French households spend savings built up during the crisis will be key to further accelerating the recovery in 2021, Villeroy said. To foster confidence, he said the government should avoid changes in tax and aim to keep public debt below 120% of annual economic output.

“If households have more confidence and dip into savings to feed their consumption, the recovery could be quicker and we could get to pre-covid levels of activity at the end of 2021,” Villeroy said.

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