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France: state of play after one year of crisis


A year ago, give or take a few days, France entered its first lockdown as it began to combat the Covid-19 pandemic. After the massive recessionary shock of 2020, where does the French economy stand today? Its health status is mixed, with strong and weak points.


TRANSCRIPT // France: state of play after one year of crisis : March 2021

A year ago, give or take a few days, France entered its first lockdown as it began to combat the Covid-19 pandemic. After the massive recessionary shock of 2020, where does the French economy stand today? We will evaluate the situation by looking at the data that have returned to pre-crisis levels, those that are still lagging and those that are above past levels.

Just recently, the CAC 40 joined the first category. Household spending on goods has also risen above pre-crisis levels, at least briefly, demonstrating its capacity to rebound as soon as lockdown restrictions are lifted. In January, industrial production also returned to December 2019 levels. Three other indicators also stand out on the upside. Business creations rapidly returned to their December 2019 level (as early as June 2020), and have kept rising ever since. Household disposable income managed to rise slightly in 2020. And in Q4 2020, the unemployment rate was at the same level as in Q4 2019.

Among the indicators that are still below pre-crisis levels, foremost is GDP, and to a lesser extent, private sector payroll employment. Here we must keep in mind the major disparities between sectors. At the aggregate level, the French economy is running at 95% to 96% of pre-crisis levels, but in the hotel and food services sector (the hardest hit), activity is nearly 40% below pre-crisis levels while the better-off real-estate sector is 0.5% above.

Business and consumer confidence are also far from their year-end 2019 levels. And the corporate mark-up has fallen to the lowest level since 1985. Surprisingly, corporate bankruptcies also stand far below pre-crisis levels (by about 40%). This can be attributed to the impact of emergency support measures. Yet the good news is likely to be short-lived. We must expect to see a rise in bankruptcies (and in the jobless rate as well), although the extent of this increase remains uncertain.

In the third group of indicators, those that are (far) above pre-crisis levels, we find the household savings ratio (driven up be a combination of forced and precautionary savings), as well as the fiscal deficit and public debt ratio (whose sharp increase reflects the double impact of the massive recessionary shock and the equally massive fiscal response). To summarise, after a year of crisis, the health of the French economy is mixed. Although prospects are improving, we must admit that there is still a lot of uncertainty over the strength of the rebound.

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