The coronavirus crisis was expected to drop France’s GDP by at least 8% this year (AFP / Ludovic MARIN)

The coronavirus crisis should drop French GDP by “at least 8%” this year depending on the duration of “act II” from deconfinement until full recovery, says the Governor of the Banque de France François Villeroy de Galhau.

The current crisis “is completely new in its nature, and more violent than the previous crises”, observes the governor in an interview with the Sunday newspaper.

“France should experience in 2020 a fall in GDP of at least 8%,” he said. The government is currently banking on -8%.

“Each fortnight of confinement leads to a drop in annual growth of around 1.5 points and almost as much in terms of additional budget deficit,” he recalls.

However, “we will not (…) suddenly go to a normal recovery” with the deconfinement from May 11, he anticipates: “It will be an act II, where we will have to grow in at the same time, health confidence and economic confidence, for entrepreneurs and for employees. ”

“We do not yet know the duration of Act II until the complete recovery,” said Mr. Villeroy de Galhau.

For him, the State “plays a role of major shock absorber”, faced with the crisis: “The massive public intervention absorbed at least two thirds of the shock, and reduces all the more its impact for households and businesses “.

“Its protective role should diminish as the recovery in the various sectors,” he says, “especially since, of course, this collective shock absorber will have to be paid in the future”.

“France will come out of this shock with a public debt increased by at least 15 points of GDP, to 115%. In the long term, it will be necessary to repay this money”, insists the governor.

GDP plunges 6% in the first quarter of 2020: quarterly evolution of French growth since 2017 (AFP /)

GDP plunges 6% in the first quarter of 2020: quarterly evolution of French growth since 2017 (AFP /)

“We will have to aim for more efficient management, especially since the French do not wish to pay more taxes,” he warns.

Meanwhile, “it is too early to (…) say” if the 110 billion mobilized by the state to support the economy will be enough.

A revival of consumption is possible, given that many French people spend less than what they earn with confinement. This difference “should be tomorrow a store of purchases, and therefore of growth” provided they are “reassured in terms of health”, according to him.

“We have to be careful, but the IMF predicts that France could find strong growth at + 4.5% next year (in 2021),” he notes.

liu / tq / swi


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