The coronavirus crisis, “Totally new in its nature, and more violent than previous crises”, is expected to drop French gross domestic product (GDP)“At least 8%” this year, depending on the duration of “Act II” of deconfinement, reports the Governor of the Bank of France, François Villeroy de Galhau, in an interview with Sunday newspaper ((JDD) April 19.
“Each fortnight of confinement leads to a drop in annual growth of around 1.5 points and almost as much in terms of additional budget deficit”, he reminds. However, “We will not pass (…) not suddenly at normal recovery “ with the deconfinement from May 11, he anticipates:
“It will be an act II, where it will be necessary to increase health and economic confidence at the same time, for entrepreneurs as well as for employees. “
“We do not yet know the duration of Act II until full recovery”, underlines Mr. Villeroy de Galhau.
“Over the long term, we will have to repay this money”
For him, the state “Plays a role of major shock absorber” facing the crisis: “The massive public intervention absorbed at least two-thirds of the shock, reducing its impact on households and businesses. “
“Its protective role should diminish as the recovery in the various sectors”, he predicts, “Especially since, of course, this collective shock absorber will have to be paid in the future”. “France will emerge from this shock with public debt increased by at least 15 percentage points of GDP, to 115%. In the long run, we will have to repay this money ”, insists the governor.
“We will have to aim for more efficient management, especially since the French do not wish to pay more taxes”, he warns. Waiting, “It is too early to (…) to say “ if the 110 billion euros mobilized by the state to support the economy will be enough.
20,000 additional loan requests per day
Mr. Villeroy de Galhau is delighted with the “Success” State Guaranteed Loans (PGEs) which allow companies to obtain money from their regular bank to overcome the difficulties they face due to confinement. Banking establishments registered 290,000 loan requests for an amount of 55 billion euros. “We are at 20,000 additional requests per day”, he specifies.
“Another favorable element: the beneficiaries of the EMPs are mainly VSEs (very small businesses) with less than ten employees, who represent almost 90% of decisions and more than half of the amounts. Unsurprisingly, the primary sectors concerned are trade and accommodation and catering. “
For him, it remains to be seen whether these companies will regain their financial capacity to repay their loan. “We could consider, on a case-by-case basis, especially for the most durably affected sectors, that the deferral of tax and social charges become abandonments, or even imagine contributions in quasi-equity”, he says. “But you have to be pragmatic and selective because it is public money. “
Boosted growth expected in 2021
A revival of consumption is possible, given that many French people spend less than what they earn with confinement. This difference “Tomorrow should be a store of purchases, and therefore of growth” as long as they are “Reassured in terms of health”, according to him.
“We have to be careful, but the International Monetary Fund predicts that France could find strong growth at + 4.5% next year”, he notes. “Banknotes are no more virus-carrying than other items, and ATMs are normally supplied and will remain so for the long term. “
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