In its June macroeconomic forecasts, the Banque de France – an institution for financial stabilization and forecasting – outlines three recovery scenarios. And she fears a disaster if a second wave of Covid-19 breaks out in France. Explanations.
Crossroads for the French and global economy. The Banque de France (BDF) published on Tuesday its macroeconomic forecasts worrying. The surge of Covid-19 has already cost eurozone economies dearly, the central bank reminds: “in the eurozone, where most countries have implemented containment measures, GDP fell by 3.8% in the first quarter and should fall by another 13% in the second quarter according to the latest Eurosystem projections.“
In France, GDP contracted by 5.3% in the first quarter, the report estimates that the wealth produced in France during the second quarter – which notably includes six weeks of confinement and the start of deconfinement – should shrink by 15 %. An economic shock caused by the coronavirus. which will leave a lasting mark on the French economy. “NOTWe are far from out of the woods“ warns the Governor of the Banque de France, François Villeroy de Galhau on Franceinfo.
According to the circulation of the virus, three possible scenarios
The main reason ? The absence of a vaccine at the present time as well as the circulation of the virus on a planetary scale. Faced with this major unknown, the BDF establishes three scenarios: a “central” where the Covid-19 would continue to circulate by hindering the economic rebound but without causing a new confinement; a “favorable” where “a greater reduction in the circulation of the virus by the end of 2020 would make it possible to return to a normal level of activity by this horizon“; and finally a “severe” where ” disturbances would remain strongerAccording to these different possibilities, French GDP would catch up with the level it should have had without this health crisis: mid-2021 for the “favorable” case, mid-2022 for the “central” and at a much more distant date and uncertain for “severe”.
The return of mass unemployment
Despite massive state aid to save jobs, the health crisis turned into an economic crisis is signaling the return of mass unemployment. “According to the first estimates published by INSEE, market salaried employment fell by 2.3% at the end of March compared to the end of December 2019, i.e. a reduction of 453,800 jobs, including more than 290,000 in temporary work.explains the BDF’s June 2020 macroeconomic forecast report. In the fourth quarter of 2020, the level of employment would be almost 1 million lower than the level reached at the end of 2019.“According to the “central” scenario, an unemployment peak of 11.5% should be reached in mid-2021. A figure “above historical precedents” note the analysts of this macroeconomic forecast. The level of unemployment should then fall back to 9.7% at the end of 2022. It goes without saying that in the event of a “favorable” or “severe” scenario, the results on unemployment would also be impacted at down or up.
Debt forgiveness idea rejected
Which of these scenarios are we heading towards? Too early to say. Households could give up consumption because of the uncertain future and the fear of unemployment. Viable businesses find themselves weakened by administrative closures and the economic slowdown. As for public policies, they will have to deal with record debt. “120% public debt may seem abstract, but it has increased twice as fast as our European neighborsanalyzes François Villeroy de Galhau at the microphone of franceinfo who rejects the idea of any erasure, even partial, of this slate. The confidence of our lenders depends on it. It is the 3rd pillar of trust after that of consumers and entrepreneurs.“
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