New lockdown to drag French economy down as much as 6%

France’s economic output will contract by 2.5-6 percent in the last quarter of 2020 depending on the length of the current partial lockdown, national statistics service Insee said Tuesday.

It now forecasts that the French economy will contract by by 9-10 percent overall this year.

The government reimposed a lockdown at the end of October as the number of coronavirus infections and hospitalisations surged higher.

The conditions are not as strict as those imposed in March, however, and Insee expects the impact on the economy to be considerably weaker.

If French economic activity plunged by 30 percent in April from pre-crisis levels, Insee expects the drop in November to be 13 percent.

But with restaurants closed for on site dining and travel restricted, it is no surprise the sector could see a 60 percent drop in activity in November.

The entertainment sector is also expected to see a drop of 40 percent.

If the lockdown is lifted at the beginning of December as originally planned, Insee expects the quarterly drop in gross domestic product (GDP) will be limited to 2.5 percent.

If it remains in place for the entire month the drop could hit 6.0 percent.

Insee’s median scenario is for the lockdown to be lifted in mid-December with some restrictions left in place, which would result in a 4.5 percent drop in GDP.

That would leave the French economy around 8.0 percent lower than its pre-pandemic level, compared with 4.0 percent lower in September.

But Prime Minister Jean Castex does not rule out allowing small businesses to reopen at the end of November depending on the health situation, and should make a decision next week, a government spokesman said Tuesday.