France’s Extended Lockdown Pushes Economy Into Deeper Recession

(Bloomberg) -- The French government was forced to revise its economic and financial forecasts for the second time in less than a week after President Emmanuel Macron extended the lockdown to combat the coronavirus.

France will base an emergency budget on economic output contracting 8% this year, instead of 6% as it had planned last week.

Extra spending to support companies and workers through the confinement will increase the budget deficit, and the situation could get worse still as there are uncertainties about the health crisis in Asia, the economy in the U.S. and how the virus could spread in Africa, according to Finance Minister Bruno Le Maire.

“We have to be very cautious about these estimations,” he said on BFMTV.

France’s actions are weighing heavy on public finances as the state is covering the majority of the incomes of furloughed workers, delaying or even canceling tax collection, and guaranteeing loans to avoid bankruptcies.

Le Maire said the state expects to spend around 24 billion euros on partial unemployment benefits, and the total emergency spending could be more than 100 billion euros budgeted if necessary.

Budget Minister Gerald Darmanin said on France Info radio that the deficit will reach 9% of GDP, and public debt 115%. Last week, the government expected 7.6% and 112%.

“We have chosen to take on debt to save our economy: more debt for fewer bankruptcies,” Le Maire said.

©2020 Bloomberg L.P.