France Cuts Growth Forecast as Nationwide Lockdown Starts
France’s economy will rebound less than previously expected this year due to the latest four-week nationwide lockdown aimed at halting a surge in coronavirus cases.
French Finance Minister Bruno Le Maire cut the country’s 2021 GDP growth forecast to 5% from 6%, following an 8.1% contraction last year. A Bloomberg survey in March showed economists were expecting the economy to expand 5.7%.
“Closing education establishments and 150,000 stores is essential to slow the spread of the virus, but these measures will have an impact on the French economy,” Le Maire told Le Journal du Dimanche newspaper in an interview published on Sunday. “This estimate is both sincere and cautious.”
President Emmanuel Macron sought to avoid a third nationwide lockdown to protect the economy but was forced last week to announce tighter restrictions across the country. More contagious, deadlier variants have accelerated the spread of the virus, and the vaccination campaign is yet to have a significant impact after getting off to a slow start.
The new lockdown came into force Saturday night after a week that saw more than 200,000 new coronavirus cases and almost 5,500 patients in intensive care. As well as stores closing, schools will remain shut for three weeks including the holiday period.
Le Maire said government assistance to businesses impacted by the lockdown would cost around 11 billion euros ($12.9 billion) in April, including 5 billion for a solidarity fund, 4 billion for furlough, 1 billion for exemptions in social charges and 1 billion to compensate fixed costs.
“Today, the French economy is running at 95%,” Le Maire said on Sunday in an interview on LCI television. “The reality is you have two economies: you have an economy that is suffering terribly, so it is fair and legitimate to support it, it’s cafes, bars, restaurants, tourism, events, sport, culture, theater, cinema.
“And you have a whole other part of the economy that’s running almost at full capacity today.”
The finance minister said the lower growth forecast means government debt will rise to around 118% of GDP, instead of 115%. The public deficit is now forecast to reach 9% this year, compared with a previous estimate of 8.5%.
ECB Governing Council member and Bank of France Governor Francois Villeroy de Galhau has urged the European Union to implement a joint recovery fund urgently to help countries cope with the impact of Covid-19.
Le Maire echoed the call in Le Journal du Dimanche, saying Europe must not delay. France was due to receive 5 billion euros from the 750 billion-euro fund in July but this was now unlikely, the finance minister said.
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