The recession more serious than expected in France under the influence of the 2nd wave and the reconfinement

The gross domestic product (GDP) should contract by 11% said Friday the Minister of the Economy Bruno Le Maire, while he expected a decline, already significant, of 10% so far.

"We are going to have a fourth quarter which will be difficult, obviously, we are confined, the French economy will turn less strong than usual," the minister warned on France Inter.

Earlier this week, he estimated that after its rebound in the third quarter, GDP would fall again in the last quarter, with a 15% contraction in activity during confinement, due to the forced closure of shops, restaurants or still places of culture.

This is less than during the first confinement, where it had fallen by more than 30%, because the restrictions are a little less severe than in the spring, with open schools and a greater continuation of work thanks to defined health protocols. these last months.

But even before the reconfinement, the economy showed signs of weakness, with indicators in the red: consumer sentiment fell in October, the business climate declined for the first time since May, and the outlook for Private sector business activity continued to deteriorate, following a first halt in September.

For Selin Ozyurt, economist at Euler Hermes, the government's new forecast for 2020 "also assumes that it has already integrated the possibility of confinement beyond four weeks", probably rather "six weeks".

And she fears a "double penalty" for companies, because a longer confinement would cut off the Christmas shopping period, she told AFP.

The government is counting on strengthening the support measures in force for companies and employees, in order to avoid layoffs and bankruptcies, especially in sectors already weakened by the first confinement and again severely affected.

He will release 20 billion euros to finance them, Bruno Le Maire estimating that they cost 15 billion euros for a month of confinement.

The employers fear a "collapse" of the economy, said the president of Medef Geoffroy Roux de Bézieux, who described as "error" the closing of most businesses.

These measures "worked" in the spring, however defended Bruno Le Maire, highlighting the strength of the rebound in the economy in the third quarter.

Bounce but not catch up

GDP grew by 18,2% compared to the previous quarter, when it had collapsed by 13,7% according to a first estimate published Friday morning by INSEE.

"We can see that as soon as the virus is no longer circulating, and the third quarter shows it, France has an extraordinary rebound capacity," said Bruno Le Maire, calling on the French to respect confinement to contain it as quickly as possible. 'epidemic.

But the GDP remained "well below its pre-crisis level", also underlined INSEE. It was down 4,3% compared to the third quarter of 2019, says the institute, which gives no updated forecast for the last quarter of 2020.

The institute also still expects a recession of 9% this year, a forecast made before the reconfinement and which was based on stagnation of the GDP in the last quarter.

Beyond the strict effect of containment, the resurgence of the epidemic reinforces uncertainty about the future, which does not encourage households to consume or companies to invest, key elements of a future recovery.

In the third quarter, the rebound in the economy was driven by household consumption, up 17,3%, but remained 2,1% below its pre-crisis level. In September, their consumption even fell sharply.

And while investment has also rebounded, the gap compared to the third quarter of 2019 has not been closed. The same goes for the production of goods and services, while foreign trade should not support the economy either.

"There are a lot of uncertainties for the start of next year," said Selin Ozyurt, who questions the "profile" of the recovery: "The relapse is going to be strong and we are not sure we can bounce back in the first quarter of 2021 ".