As a result of a more dynamic than expected economic recovery, the government raised its 2021 growth forecast on Monday 11 October to 6.25% – it was previously 6% -, thus aligning itself with the forecasts of the most large institutions.
“Growth is strong, it is solid, it is dynamic. We will therefore revise the growth forecast for 2021, from 6% to 6.25%. In December 2021, we will return to the pre-crisis level of activity ”, announced the Minister of Economy and Finance, Bruno Le Maire, to the National Assembly. The deputies began there, Monday afternoon, the examination of the last budget of the quinquennium.
The government is thus aligning itself without surprise with the forecast of INSEE and is approaching those of the Organization for Economic Cooperation and Development and the Bank of France (each at 6.3%) published in September. In a conjuncture point, published Monday, the Banque de France estimates that the activity “In October would be almost 100% of its pre-crisis level”.
Unemployment rate could drop to 7.6%
This rebound in the French economy comes after a historic recession in 2020 due to the health crisis, which caused an 8% drop in gross domestic product. If the government showed a willingness to “Caution” So far, the success of the vaccination campaign and the implementation of the health pass this summer, which did not have a significant impact on activity, now allow it to slightly review its ambitions.
After a sluggish start to 2021, due to the maintenance of health restrictions, activity has picked up sharply since mid-May. It should now return to its level at the end of 2019 by the end of the year, say economists and the government. In addition to a mechanical rebound with the reopening of many activities, Bruno Le Maire also sees the success of “Economic policy” government, measures to support the recovery plan, including pre-crisis economic choices.
A revealing sign widely put forward by the executive in recent weeks: employment is at unprecedented levels. The unemployment rate could drop to 7.6% in the third quarter, unprecedented since the 2008 financial crisis.
New investments with the France 2030 plan
While the health risk seems to be receding for the moment, Bruno Le Maire has identified three new dangers for the French economy, including the risk of conflict “Exacerbated” between nations, which should lead France and Europe to rebuild their ” independence “, especially industrial. Emmanuel Macron will present on Tuesday with this in mind an investment plan, called “France 2030”, which aims to finance the development of technologies and growth sectors (hydrogen, biotechnologies, space, nuclear, etc.).
The other risks pointed out by the Minister of the Economy are inflation, whose surge, driven by energy prices, is straining the purchasing power of the French, and growing recruitment difficulties in a number of sectors. (catering, building, etc.). “Full employment, we can achieve it in two years”, affirmed Bruno Le Maire in front of the deputies, in a speech with the accents of electoral campaign, six months before the presidential election.
He also defended the government’s serious budget, despite the explosion of the public debt and the deficit during the crisis. The latter, expected so far at 4.8% of GDP next year (after 8.4% this year), should ultimately be around 5%. The government must still take into account the expenses generated by the France 2030 plan, the future commitment income promised for young people, which the government is struggling to achieve, and the compensation measures in the face of rising energy prices.