ZCZC
BCN-10
FRANCE-ECONOMY-RECESSION
France in recession as virus-hit economy shrinks 5.8 percent
PARIS, April 30, 2020 (BSS/AFP) – The French economy officially fell into
recession after contracting 5.8 percent in the first quarter, the national
statistics office said Thursday, underscoring the massive toll of the
country’s nationwide shutdown to curb the coronavirus outbreak.
Even though the business closures and stay-at-home orders were imposed only
the final two weeks of the quarter, the drop-off in activity was a hammer blow
that has put more than half of France’s private-sector employees out of work.
It was the worst quarterly performance since the Insee statistics agency
began charting French gross domestic product in 1949, and follows a 0.1-
percent decline in the last quarter of 2019 — meeting the definition of a
recession as two consecutive quarters of contraction.
Insee said the drop was due mainly to the halt of non-essential activities
since mid-March, underscoring a 7.3-percent collapse in household spending on
goods — a drop that reached 17.9 percent in March alone.
The government has already said it expects an eight-percent contraction for
the French economy this year as it prepares to start lifting the lockdown on
May 11.
It has announced 110 billion euros ($120 billion) in financial aid and
other relief for businesses, and President Emmanuel Macron has vowed that “no
company would be abandoned to the risk of bankruptcy.”
But Finance Minister Bruno Le Maire told lawmakers Wednesday that “we must
be realistic about the fact that once the shock has been absorbed,” there is a
risk of a “cascade of failures” and a “severe” impact on unemployment.
In additional to the aid package, the government is guaranteeing up to 300
billion euros in loans for affected businesses.
– Health vs growth –
Entire sectors of the French economy have effectively been shut down, the
Labour Ministry says, with nine out of ten workers in hotels and restaurants,
as well as in construction now unemployed.
Business groups have warned that even with the loans and financial relief
such as delayed payment of payroll taxes and other charges, thousands of small
and midsize companies could be facing bankruptcy this year.
The government announced this week that if encouraging declines in COVID-19
cases continue, many businesses will be allowed to open on May 11, and some
children will progressively start returning to class.
But bars, restaurants and cinemas will remain closed until June at the
earliest, and companies are being urged to keep their employees working from
home, to avoid a second wave of coronavirus deaths.
“We must protect the French without immobilising France to the point that
it collapses,” Prime Minister Edouard Philippe said in announcing the measures
this week.
The toll has also been heavy on France’s blue-chip companies, with top bank
Societe General reporting Thursday a first-quarter loss of 326 million euros,
its first quarterly loss since 2012.
The bank said it would cut costs by an additional 600 to 700 million euros
this year to weather the crisis.
Tyre giant Michelin said late Wednesday that its sales slid 8.3 percent in
the quarter to 5.3 billion euros, reflecting the worldwide slump in vehicle
sales and construction activity.
BSS/AFP/MMA/1555HRS