The French economy is expected to contract a worse-than-expected 8 percent this year, reflecting the effects of a coronavirus lockdown extended until May 11, French Minister of the Economy and Finance Bruno Le Maire said yesterday.
Le Maire had previously forecast a 6 percent decline in GDP for this year, but that was based on a lockdown that lasted one month, instead of the two-month period announced by French President Emmanuel Macron in a televised address on Monday.
Le Maire told BFM television that the 8 percent forecast would be included in a new budget for this year set to be unveiled this week, but added that given the uncertain outlook for economies around the world, not least in the US and Asia, “these forecasts need to be considered with caution.”
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A massive relief effort for bars, restaurants, hotels, shops and other businesses closed during the lockdown would push France’s budget deficit up to 9 percent of GDP this year, French Minister of Public Accounts and Action Gerald Darmanin said separately in an interview with France Info radio.
“Each day, each week of confinement ... is worsening our public finances,” he said, adding that France’s debt pile would soar to 115 percent of GDP, up from just under 100 percent last year.
Both forecasts are well above the limits set by the EU’s Stability and Growth Pact, which calls for deficits to be capped at 3 percent of GDP and a debt-to-GDP ratio of 60 percent.
However, EU officials have signaled that the rules are to be suspended as governments scramble to contain the economic fallout, and prevent mass bankruptcies and layoffs.
Le Maire said that government aid for smaller companies at risk of going under, after losing at least 50 percent of their revenue, would be raised to as much as 5,000 euros (US$5,466), up from 1,500 euros previously.
The total amount of the rescue fund totals 7 billion euros, he said.
Economists have said that the EU is heading for a double-digit percentage slump in the first half of this year amid widespread lockdowns.
A monthly survey by Bloomberg puts the contraction in the eurozone at more than 10 percent in the January-to-June period, with most of the hit — 8.3 percent — in the second quarter.
Even with an expected rebound later in the year, the bloc’s output is likely to decline more than 5 percent this year.
The Bloomberg survey shows widespread damage to eurozone economies this quarter, with Germany likely contracting 7.6 percent, Italy 8.8 percent, Spain 10 percent and the UK nearly 12 percent.
The timing of any rebound depends on when restrictions on movement, gatherings and businesses are lifted, or at least eased.
While some governments have indicated that they expect to relax some rules, the rapid spread of the virus so far suggests a return of normality remains a distant prospect.
Additional reporting by Bloomberg
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