France in recession as economy hit by viruses shrinks 5.8%

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The French economy has officially entered a recession after contracting 5.8% in the first quarter, the National Statistics Office announced today.

The figures underscored the massive toll of the country’s national closure to curb the coronavirus epidemic.

Even though business closings and home support orders were only imposed in the last two weeks of the quarter, the drop in activity was a hammer blow that put more than half of the workers in unemployment out of work French private sector.

It was the worst quarterly performance since the statistical agency INSEE began to map French gross domestic product in 1949, and followed a decline of 0.1% in the last quarter of 2019.

This fits the definition of a recession as two consecutive quarters of contraction.

INSEE said the decline was mainly due to the cessation of non-essential activities since mid-March, highlighting a collapse of 7.3% in household spending on goods – a drop which reached 17.9% in March only.

The government has already said it expects an 8% contraction in the French economy this year as it prepares to lift the blockade on May 11.

He announced € 110 billion in financial and other assistance to businesses, and President Emmanuel Macron has promised that “no business will be abandoned at the risk of going bankrupt.”

But Finance Minister Bruno Le Maire said that “we have to be realistic that once the shock is absorbed”, there is a risk of a “cascade of failures” and a “serious” impact on the economy. unemployment.

In addition to the aid package, the government guarantees up to 300 billion euros in loans to the companies concerned.

Whole sectors of the French economy have effectively been closed, according to the Ministry of Labor, with nine out of ten workers in hotels and restaurants, as well as in construction, now unemployed.

Business groups have warned that even with loans and financial relief such as late payment of payroll taxes and other charges, thousands of small and medium-sized businesses could go bankrupt this year.

The government announced this week that if the encouraging declines in the Covid-19 cases continue, many companies will be allowed to open on May 11 and some children will gradually start going back to school.

But bars, restaurants and cinemas will remain closed until June at the earliest, and businesses are urged to keep their employees working from home to avoid a second wave of coronavirus deaths.

“We must protect the French without immobilizing France to the point where it collapses,” said Prime Minister Edouard Philippe when the measures were announced this week.

The balance sheet was also heavy for first-rate companies in France, the leading bank, Société Générale, reporting today a loss of € 326 million in the first quarter, its first quarterly loss since 2012.

The bank said it would cut costs by another 600 to 700 million euros this year to overcome the crisis.

Tire giant Michelin said last night that sales fell 8.3% in the quarter to 5.3 billion euros, reflecting the worldwide drop in vehicle sales and construction activity.



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