By Leigh Thomas
PARIS (Reuters) – France’s economy probably fell 6% in the first quarter compared to the previous three months, as a nationwide shutdown due to the coronavirus epidemic has closed large swathes of the economy, said the central bank on Wednesday.
It would be the largest quarterly contraction since World War II, surpassing the previous record of -5.3% in the second quarter of 1968, when France was struggling with civil unrest, mass student protests and general strikes.
France has been subject to residence orders since March 17, which officially end on April 15, although the government has warned that they could very well be extended if they were deemed prudent.
A typical week of containment in March saw economic activity cut by almost a third, the central bank said in an analysis of the economic fallout from the epidemic.
Given these low levels of activity, every two weeks the country goes into lockout could reduce annual economic activity by 1.5 percentage points, the Banque de France estimated, on par with projections for the statistical office of INSEE and independent think tanks.
Last month, the government launched a € 45 billion ($ 48.8 billion) economic rescue package consisting mainly of deferred tax payments and offered to guarantee up to € 300 billion in loans to private liquidity companies.
The government has estimated that the budget deficit will swell to more than 3% of economic output this year, and the Governor of the Banque de France, François Villeroy de Galhau, said that every two weeks of detention added one percentage point to budget deficit.
“All of this will have to be paid for, but now is not the time to count,” Villeroy said on RTL radio.
He reached his conclusions based on feedback from his monthly business climate survey, which surveyed 8,500 companies from March 27 to April 3 on their activity and prospects.
Executives who responded to the survey said industrial capacity use averaged a historic low of 56% in March, down from 78% in February. By industry, the automotive industry had the lowest usage rate, at 41%.
Industrial companies lost an average of five working days in March while service sector companies had to close on average six days. For the restaurant industry, this figure rose to 14 days.
With business activity dropping sharply, businesses have reported an increase in demand for credit.
($ 1 = 0.9213 euros)
(Report by Leigh Thomas; Edited by Edwina Gibbs)