restrictions weigh on growth, government lowers forecast

The new restrictive measures taken to fight the Covid-19 pandemic are leading the government to lower its growth forecast by one point this year, announced the Minister of the Economy, Bruno Le Maire, on April 4 at Sunday newspaper (JDD).

“Close schools and 150 000 shops are essential to curb the circulation of the virus. But these measures will have an impact on the French economy. We are therefore going to revise our growth by 6 % at 5 % for 2021 “, explained the minister, while the French GDP had contracted by 8.2% in 2020. “This estimate is both sincere and prudent”, assured Mr. Le Maire, who had already warned that the executive would lower its growth forecasts.

A gradual end of public aid

The governor of the Banque de France, François Villeroy de Galhau, for his part estimated on Thursday that the restrictions announced this week “Should not lead to a very significant revision of [sa] forecast “ 5.5% growth for 2021 if they do not last beyond ” may’s beginning “.

The total cost of aid is estimated at 11 billion euros in April, Bruno Le Maire reminded the JDD, adding that “The presidential promise of ‘whatever the cost’ will be kept”. This support policy will be continued “As long as the health crisis lasts”, he stressed.

The end of public aid will be gradual, he promised: “We will do things gradually, so as not to brutalize anyone. We have been able to protect companies in the crisis, we will know how to support them in coming out of the crisis. “In certain sectors which will remain permanently affected, such as aeronautics, support will be maintained”, noted the minister.

“But I want to reassure the French: we have no difficulty raising debt on the markets, at very low interest rates. The European Central Bank has confirmed that it will maintain its monetary policy to support the economy ”, he noticed.

“We will know how to bounce back”

He reiterated that the debt should be repaid after the crisis, which he said will be possible thanks to “Strong growth, better control of public operating expenditure and the pursuit of structural reforms – starting with that of pensions ”.

Before initiating a possible new recovery plan, Mr. Le Maire wants “Continue to rapidly disburse the 10 billion euros” of the program announced in September, of which he wants to spend half by the end of 2021.

The Minister of the Economy took the opportunity to criticize again the slowness of certain countries to ratify the European recovery fund of 750 billion euros. “France was to receive 5 billion in July. It is unfortunately unlikely that we will receive this amount on this date ”, he regretted.

The French economy should “Bounce back faster and stronger when health restrictions are lifted”, predicted the minister, recalling that it had gained 18% in the third quarter of 2020. “Believe me, our fundamentals are solid. We will be able to bounce back. (…) We remain an attractive nation ”, he insisted.

In the meantime, Bruno Le Maire has focused on certain support measures for traders affected by the new restrictions. In particular, like restaurants, they will be able to receive aid of up to 200,000 euros per month. “We will also compensate part of their unsold stocks”, he said, while high corporate rents “Will be covered up to a limit of 10 million euros”.