The estimate announced by the Banque de France corresponds to the French economy's worst quarterly performance since 1945. Given the 0.1% decline in GDP in the fourth quarter of 2019, France is therefore entering a recession.
Heavy business losses in most sectors
Gross domestic product plunged by 6% in the first quarter of 2020, according to an estimate by the Banque de France, the worst decline since the end of the Second World War. This figure comes as no surprise, and is directly linked to the virtual cessation of activity since the introduction of containment on March 17 to combat the spread of Covid-19.
In France, the agri-food and pharmaceutical industries are the most resilient to the crisis, maintaining over 70% of their business. However, the Banque de France points out that most sectors have suffered severe business losses. The hardest hit were construction, transport, trade,accommodationand catering.
To materialize this decline, the institution took into account the number of days during which companies were forced to cease activity during the last two weeks of March. In the market services sector, businesses were closed for an average of 6 days, compared with 14 days in the catering sector and 13 days in the accommodation sector. Business services fared better, with an average of between 1 and 3 days.
The parallel with May 1968
The current health crisis is not comparable to those previously experienced in France, as the recession is not linked to the bursting of a financial or real estate bubble. The drop in activity induced by containment is much greater than that seen during the 2008 crisis. National statisticians confirm that the shockwave will be "far greater".
According to the Governor of the Banque de France, France's current crisis is more akin to May 1968, when the economy was brought to a standstill for several weeks. In the second quarter, GDP fell by more than 5%. The bank expects French growth to be "strongly negative in 2020", but should be positive in 2021 thanks to support for entrepreneurs and their employees. As a reminder, the government has launched a €300 billion state-guaranteed loan scheme to provide support to businesses facing financial difficulties. Over 100,000 companies have already applied for the loan. However, there is no guarantee at this stage that all the companies in need will be able to benefit.