The grim financial data has been released as Emmanuel Macron plans to impose new lockdown measures across France amid a COVID-19 outbreak. The seasonally adjusted decline in gross domestic product was not as steep as many analysts had predicted, but was worse than the performance of most of France’s other eurozone countries.
The French economy has contracted for three consecutive quarters and analysts warn the recession is likely to persist even as spending begins to pick up.
INSEE figures show that household consumption, the main engine of the French economy, fell by 11%.
France’s contraction in the second quarter was much stronger than Germany’s record fall of 10.1%, while Austria suffered a decline of 10.7% and Belgium a decline of 12.2 %.
Spain suffered an 18.5% drop in its GDP in the second quarter following one of Europe’s toughest COVID-19 lockdowns, which brought its key tourism sector to its knees.
Capital Economics analyst Jessica Hinds said: “While the catastrophic collapse of French GDP in the second quarter was not a shock given the country’s tight lockdown, it further underscores the extent of the economic damage caused by the pandemic. ”
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Investment fell 17.8 percent as the lockdown and travel restrictions hit the transport sector which was down 46 percent and the food service and hospitality sectors, which suffered a 57 percent drop.
The INSEE declared: “The gradual end of the restrictions led to a gradual recovery of economic activity in May and June, after the low point reached in April”.
Mr Macron has pledged a 100 billion euro stimulus plan for spending and investment, having already spent at least 460 billion euros to limit social and economic devastation.
Many employees are paid by the state to help limit direct layoffs from companies hardest hit by the lockdown.
The number of coronavirus infections has skyrocketed in France in recent weeks, especially among young people, even though the number of patients receiving life-saving care in hospitals is stable.
Asked how the government should get households to spend the 100 billion euros in savings they are sitting on, Mr Macron said consumers were holding back due to the continued spread of the virus, fear unemployment and concerns about tax increases.
He said, “What we need to do is get people back to work. ”
(Additional reporting by Maria Ortega)