France cuts economic growth forecast to 5% amid lockdown - GulfToday

France cuts economic growth forecast to 5% amid lockdown


Patients receive COVID-19 vaccine in Sarcelles, outside Paris, on Sunday. Associated Press

The French economy will expand by 5% in 2021, Economy Minister Bruno Le Maire said in a newspaper interview, as a third lockdown to tackle the coronavirus pandemic has prompted a downward revision in the previous government forecast for 6% growth.

The new forecast was prudent, Le Maire said in comments published on Sunday in Le Journal Du Dimanche (JDD).

“Our fundamentals are sound; we will be able to bounce back,” Le Maire said.

French schools and non-essential stores such as clothing chains will now be shut for four weeks, after COVID-19 cases surged in recent weeks, edging up the number of patients in intensive care units.

Restaurants have already been closed for months, while tourist travel is at a standstill, although unlike when France entered its first national lockdown a year ago, construction work and manufacturing are among business areas still ticking over.

Like many countries in Europe, France has ploughed billions of euros into propping up struggling companies with state-backed loans, help with rents and partial unemployment schemes.

The latest restrictions will force some 150,000 businesses to temporarily close, and aid measures in April will cost 11 billion euros, the finance ministry has said. Le Maire has repeatedly called for the European Union to accelerate the ratification and implementation of its 750 billion-euro economic stimulus plan.

He told the JDD that France was now unlikely to get the 5 billion euro disbursement from that scheme in July as planned, due to delays.

France has its own 100 billion-euro economic reboot programme, and plans to spend roughly half of that budget by the end of the year, Le Maire said

France’s government deficit will deepen and public debt rise after a lingering Covid crisis smashed hopes of a rapid economic rebound, Finance Minister Bruno Le Maire said on Sunday.

The annual deficit, which has spiralled as President Emmanuel Macron’s government tries to prop up the struggling economy with massive spending, is now expected to reach nine percent of gross domestic product (GDP) in 2021, he told reporters.

This compares to an 8.5 percent estimate included in the government’s 2021 budget plan, and a three percent deficit limit EU members must usually respect but have swept aside as they deal with Covid.

The minister had already told Sunday paper JDD that economic growth was now likely to come in at 5.0 percent this year and not 6.0 percent as believed earlier.

The government last week extended Covid restrictions to cover the entire country and said they would remain in place for at least a month.

“These measures will affect the French economy,” Le Maire said.

France’s debt level was now likely to hit 118 percent of GDP this year, Le Maire told the Grand Jury LCI-RTL-Le Figaro TV programme, up from an earlier 115 percent estimate and around double the EU’s 60-percent debt ceiling.

The minister called the new forecasts “exact and sincere”.

France is going through a third wave of the pandemic which has seen daily new cases surge to 40,000, around double their level a month ago.

Le Maire also said he had reached an outline agreement with the European Commission allowing France to pay more aid to flagship carrier Air France which has been struggling due to Covid restrictions along with the rest of the world’s airlines.

In return, Air France would have to give up some slots at Orly, Paris’s second-busiest airport after Charles-de-Gaulle, he said.

The sums involved would be discussed with the carrier which was expected to vote on the deal at a board meeting Monday, Le Maire said.

Rival airline Ryanair has lambasted French state aid for Air France, saying it distorts competition.

Although the Irish airline lost its legal case against state aid for the French carrier, it has argued that any additional help should be made contingent on Air France giving up airport capacity.

France reported on Saturday that 5,273 people were in intensive care units (ICU) for COVID-19, a rise of 19 from the previous day, as the country entered its third national lockdown to help combat the pandemic.

The government had been trying to keep the lid on new COVID cases with curfews and regional measures but from Saturday, and for the next four weeks, schools and non-essential businesses across the country will remain shut.

The rise in ICU patients on Saturday followed a much bigger jump the day before — the highest in five months, at 145. President Emmanuel Macron has pledged more hospital beds to care for critically ill COVID-19 patients.

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