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Reconfinement : Bercy forecasts an 11% drop in GDP

Published November 02, 2020 - 2 mins reading time
Bank watch
Until now, the government had forecast a 10% fall in GDP for the year as a whole. But the reconfinement, for a minimum period of one month, has reshuffled the cards. According to Bruno Le Maire, Minister of the Economy and Finance, GDP should contract by 11% instead of 10%.

GDP 2020: Q3 rebound exceeds estimates

During Q3 2020, GDP grew by 18.2% compared with the previous quarter, and household consumption had almost returned to the level at the end of 2019, as had exports. Despite this rebound, however, GDP remained below its pre-health crisis level, at -4.3% compared to Q3 2019.

Bruno Le Maire, French Minister of the Economy and Finance, uses this 3rd-quarter rebound to explain a "moderate" revision of GDP despite the reconfinement.

"We had a very strong third quarter, which reflects one simple fact: the French economy's capacity to bounce back is considerable," he declared on Friday October 30 at the France Inter radio station.

On his Twitter account, he underlined his position by declaring: "The French economy rebounded strongly in the third quarter. This is proof that our measures to support businesses and employees are working. By continuing this supportive economic policy, we will return to strong and considerable growth as early as 2021."

Cautious economists

While the French Minister of the Economy and Finance is hoping for a less severe slowdown than in the spring, due in particular to continued activity in the construction sector, many economists are nonetheless cautious.

Some, like Véronique Riches-Flores, believe that economic analyses do not take sufficient account of seasonality. The months of November and December concentrate a large part of annual activity in all sectors, while April and May are the weakest months in terms of economic activity, apart from July and August.

What's more, as Oddo BHF economist Bruno Cavalier points out, the reconfinement comes at a time when the economy is already weakened: many businesses are in debt, and the French are very careful with their spending.

The fall in GDP could therefore be greater, as could the repercussions for 2021.