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The French economy will contract by 8.7% this year owing to the COVID-19 pandemic, the central bank estimated on Monday, September 14, less than originally forecast due to consumer spending.
The Bank of France had previously expected a 10.3% slump as companies reel from the impact of coronavirus restrictions that have prompted hundreds of thousands of layoffs.
However, “the 2nd quarter shock was less significant than expected,” the bank said, adding that “the rebound suggested by business surveys in recent months has been stronger.”
As a result, the French economy could return to its pre-crisis levels by early 2022, instead of later that year as the bank had expected.
The new forecast is in line with the 9% drop expected by statistics office Insee, which produces official economic data, though for now the government has not changed its outlook for an 11% decline.
Third quarter growth is expected to jump by 16% from the 2nd quarter, when gross domestic product (GDP) plunged by 13.8% amid a two-month nationwide lockdown.
The increase reflects household spending that held up better than expected, as well as resilience in the automobile, construction, and even restaurant and hotel sectors – foreign travel restrictions meant many French took vacations closer to home this summer.
But unemployment is expected to keep climbing, despite the government’s financing of salaries for employees who have been laid off or forced to reduce their hours.
Unemployment, set to reach 9.5% by the end of this year, could rise to 11.1% in 2021, the Bank of France said.
“We are entering a phase where economic activity is going to keep improving, but we are not at all near the rhythm we have seen these past months,” the bank’s director general Olivier Garnier told a press conference. – Rappler.com