The French Economy Will Shrink In The Last Quarter

The French Economy Will Shrink In The Last Quarter

The French economy will shrink by 2.5 to 6 percent in the last quarter of 2020, depending on the length of the current blockades to prevent the spread of the new coronavirus. This was stated in its estimate by the statistical office INSEE. INSEE also predicted that the performance of the euro area's second largest economy would decline by 9 to 10 percent for the whole of this year. The government in Paris reintroduced blockades in late October as the number of infected and hospitalized people began to increase rapidly. However, the renewed blockades are not as strict as in March and April. INSEE therefore expects their impact on the economy to be weaker. While economic activity in France fell by as much as 30 percent in April from the pre-pandemic level of the new coronavirus, INSEE expects it to fall by 13 percent in November. At the same time, the statistical office pointed out that due to the closure of restaurants, which can only provide delivery services, and limited travel, the sector could experience a decline in activity of up to 60 percent in November. And the entertainment industry is predicted by INSEE to reduce activity by about 40 percent. If the blockades are lifted in early December, as originally planned, INSEE estimates a decline in gross domestic product (GDP) of 2.5 percent in the fourth quarter. But if the blockades continue for a whole month, GDP could fall by as much as 6 percent quarter on quarter. Another option is to lift the blockade in mid-December, with some restrictions remaining in place, which would result in a 4.5 percent drop in GDP. At the same time, Prime Minister Jean Castex does not rule out that it will allow small businesses to reopen at the end of November, depending on the health situation. A government spokesman said, the cabinet should decide on it next week.