Central bank sees French GDP down 9-10pc

PARIS (AFP) – France’s central bank said yesterday it expects economic activity to decline between nine and 10 per cent 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 confinement earlier this year.

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

The central bank had forecast in September that economic activity, or gross domestic product (GDP), would decline by 8.7 per cent 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.

A man walks by the closed English and American literature bookstore, Shakespeare and Co in Paris. PHOTO: AP

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

The Banque de France said economic activity was running four per cent 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 per cent drop in November activity pales in comparison with 31 per cent registered in April.

“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.