France’s economic recovery after the coronavirus lockdown is stronger than expected, the Banque de France said on Monday as it revised upward its growth and inflation forecasts for this year and next.
The slump in the eurozone’s second-largest economy during state-ordered lockdown has not been as deep as initially expected, and recent activity has been better than business leaders expected, showed central bank investigations.
Labor markets will not be as badly damaged as initially feared and economic output is expected to return to pre-covid levels in early 2022, instead of mid-2022 as the Banque de France predicted. in June.
“The recovery is going a little better than expected,” Governor François Villeroy de Galhau said in an interview with the French daily Le Monde. “France will return to pre-crisis levels a little before the European average. “
thea less bleak outlook in France and some other eurozone economies is easing the pressure on the European Central Bank to provide new impetus. There was no policy change at a meeting last week, although officials pointed out thethe recent strength of the euro makes it more difficult to meet the inflation target,
The French central bank’s monthly survey showed that economic activity in August was only 5% below pre-crisis levels after a 7% gap in July. He expects little change in September, which would mean a rebound in gross domestic product of around 16% in the third quarter after falling 13.8% in the second.
The loss of activity will be further reduced in the last quarter between 3.5% and 4%, said the Banque de France. According to its survey, a third of business leaders have already returned to normal levels and more than half expect to be there by the end of the year.
While some 800,000 jobs will be lost in France in 2020, unemployment will begin to drop from a peak of 11.1% in early 2021 and drop below 10% in 2022, the Banque de France said.
He slightly raised his HICP forecast – a harmonized measure of inflation – from 0.1 percent per year to 0.5% in 2020, 0.6% next year and 1% in 2022. Inflation services has recently been supported by sectors such as hairdressing and restaurants are raising prices to recover costs, the institution said.
Still, the central bank has warned that its outlook is surrounded by the uncertainty of the Covid pandemic. France reported on Saturdaymore than 10,000 new cases of coronavirus, the biggest daily increase since the country’s lockdown ended.
“The upward revision of economic forecasts should not obscure the fact that the virus continues to circulate and slow down activity,” said the Banque de France.