French central bank cuts 2021 GDP forecast to 5%

The French economy is set to recover next year from the coronavirus pandemic-induced recession, but at a slower pace than previously expected after a second natiowide lockdown was imposed in October, the Bank of France said.

In a statement on Monday, the eurozone’s second-biggest economy is set to rebound by 5 per cent in 2021 and 2022 from a contraction of 9 per cent in 2020, Xinhua news agency reported.

Before the second wave of the pandemic which started in September, the central bank had estimated that the country’s GDP could shrink by 8.7 per cent in 2020 and bounce back with growth of 7.4 per cent in 2021 and 3 per cent in 2022.

“After a drop in activity in the second quarter, during the first containment, then a very clear rebound from June to September, the French economy suffered at the end of the year a new negative shock linked to the resumption of the epidemic and health measures,” the bank statement said.

On October 30, the government ordered the closure of all non-essential businesses in order to contain the second wave.

“This second confinement has a significant impact but much less strong than that of spring. The GDP would thus fall by around 9 per cent over the whole of 2020,” the central bank added.

It projected that, in the central scenario, the pandemic would not stop immediately and that the generalized deployment of vaccines would not be fully effective until the end of 2021.

“Under these conditions, the level of activity at the end of 2019 would not be recovered until mid-2022, and the catching-up would be spread over 2021 and 2022, with GDP growth of around 5 per cent over each of these two years.

“In 2023, growth would still be a little over 2 per cent, a pace still high, but less unusual,” the central bank statement said.

Warning that “there are many uncertainties”, the central bank governor Francois Villeroy de Galhau told the media that the growth outlook “is rather cautious”.

He added that the French economy was operating down 8 per cent from normal levels in December, following an 11 per cent drop a month earlier and a 31 per cent loss in April when the country was under strict lockdown.

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