As with other European countries, the second wave of the coronavirus has had and continues to have a significant impact on the French economy.
The new strict lockdown implemented in November with the closure of shops and drastic restrictions on mobility and the severe restrictions imposed in December led to a 1.3% drop in GDP in the fourth quarter of 2020, pushing the economy 5% below its pre-crisis level.
In the end, for the whole of 2020, GDP fell by 8.2%, a historic drop for France and much sharper than that observed on average in the euro area.
Simultaneously, thanks to the strong support measures put in place by the government, including the partial unemployment scheme, employment fell only slightly over the year (-1.1%), and household purchasing power was preserved.
Stagnation Expected in the First Quarter
For the beginning of 2021, the outlook remains lukewarm.
Since the beginning of the year, and unlike Germany or the Netherlands, France has been able to avoid a new closure of shops and schools, but restrictions remain very important and continue to increase due to a health situation that is far from being completely under control.
In particular, the 6pm curfew, the closure of major shopping centres, bars, restaurants, ski lifts, leisure and cultural venues are having a major impact on economic activity, and mainly on the services sector.
Household consumption remains largely hampered. And the new restrictions, including weekend lockdowns, which have been in place since the end of February in certain cities, leave little hope that the situation will improve by the end of March.
Fortunately, the industrial and construction sectors are less sensitive to the restrictions than they were during the first lockdown and can act as a driver for the French economy.
Thus, industrial production recovered strongly in January, posting monthly growth of 3.3%, though still 1.7% below its pre-crisis level (February 2020). The construction sector is in a very good position, posting a 4.4% increase in January compared to its pre-crisis level.
With business climate and PMI indicators in industry pointing in the right direction, industry should continue to drive the French economy throughout the first quarter. However, this will not fully offset the negative effects of the restrictions on the services sector.
For 1Q as a whole, economic activity in France is likely to stagnate at around 5% below its pre-crisis level. We, therefore, expect a GDP growth rate of 0% quarter-on-quarter in the first three months of the year.
Since the beginning, the vaccination campaign in France has been moving at a very slow pace. On 8 March, only 6.1% of the total population had received at least one vaccine dose, which does not improve the health situation or envisage any schedule for easing measures in the coming weeks.
Nevertheless, the pace of vaccination has accelerated in recent days. The government expects that 10 million French people (15.1% of the population) will have received the first dose by mid-April and 20 million by mid-May.