The lockdown measures have brought a significant portion of the French economy to a halt. The OFCE has calculated that the gross domestic product will be reduced by 120 billion euros.
The OFCE estimated that the GDP loss amounts to 32% during the lockdown period, which corresponds to a decline of five points for 2020.
35% of the national income loss is attributed to businesses, notes the French Economic Observatory, “which raises the question of the rebound after the lockdown episode.”
Nearly 60% is absorbed by public administrations, which will quickly require the implementation of measures to replenish the state’s coffers.
Paradoxically, one of the keys to recovery is in the hands of consumers. The French saved a lot during the lockdown, amounting to 55 billion euros: if the entirety of these savings is spent, the public deficit would only “plunge” by 20 billion euros (0.9 points of GDP).
This would reduce the annual loss of activity to 2 points of national income, instead of 5 points.
If the French do not touch their savings after the crisis, then “the contribution of eight weeks of lockdown to the evolution of the public deficit would be 2.8 points of GDP, or 65 billion euros.”
The OFCE is not necessarily optimistic. Households suffered an income loss of 9 billion euros during these two months. And many restrictions will continue, which will cause “costly” adjustments in terms of unemployment.
This is all the more true because businesses will also continue to suffer: the profit margin rate will shrink by 2.9 points of added value over the year, which represents a loss of 35 billion euros. Therefore, businesses with limited room for maneuver will reduce their investments and employment.
