After the terrible shutdown shock, which led to a historic GDP contraction threatening France's economy (-13.8% QoQ in the second quarter of 2020 and -5.9% in the first quarter of 2020), the recovery looked particularly dynamic.
In the third quarter, France recorded the highest growth rate in the Eurozone (18.2% QoQ or 95.4% QoQ).
Unfortunately, the fourth quarter will be synonymous with a new contraction in activity due to another shutdown implemented in France in November.
Although it is less strict than that in the spring, the new means that all bars, restaurants, unnecessary stores, sports, tourist and cultural venues are now closed, and unnecessary travel is also prohibited.
As a result, a decrease in activity is expected of about 15% during the month, which means that the GDP should decline by 5% on a quarterly basis in the fourth quarter and 9.5% over the entire year. The contraction of the GDP will reach 9.5%. .
The risks remain skewed to the downside, in fact President Emmanuel Macron has warned people that the lockdown could be extended if the number of cases does not drop to 5,000 cases per day (compared to 45,000 cases per day at the beginning of November), so there is a high probability that this target will not be met early December and the lockdown will be extended.
Since December is a very important month for shops, the economic impact could be higher than in the previous month.
The lockdown for the whole month of December could mean a drop in GDP of more than 10% in the fourth quarter and an annual contraction of more than an additional percentage point.
Returning to complete quarantine is just as bad for the French economy as it is for the rest of the economies around the world.
The political crisis in the country
However, it is not clear whether President Macron and his government would dare choose to extend the lockdown for the entirety of December.
Indeed, public support for these measures has decreased sharply compared to the spring, it is clear that it is difficult to accept them and they feel "Corona fatigue."
There is also anger over the closure of small shops deemed unnecessary while all schools remain open and workers continue to go to their workplace.
Politically, the situation is very complicated for French officials. Social unrest may loom on the horizon, reminding Macron of the painful "yellow jackets" period.
The voices of dissent and even the nation's trade unions, small business owners, and advocates for big companies are increasing too.
This is a difficult time for Macron as he is nearing the end of his presidential term and in 2021 he will begin his campaign for re-election the following year.
The current situation does not give him much opportunity to make progress on key reforms he has promised, including pensions and public governance.
The only advantage for him at the moment is that no other presidential candidate appears to have been able to demonstrate that he could have managed the health crisis better.
Currently, polls predict a tie between Emmanuel Macron and Marine Le Pen , from the far right, in the upcoming presidential election. Given the extremely complex security context, Macron will have to please right-wing voters, otherwise they risk being lured by Le Pen, while at the same time being seen as not abandoning the left-wing electorate.
It is a delicate balance, of course, not least because of the lack of certainty about the economic recovery next year.
The great economic crisis
A recovery can actually be expected in the first quarter of 2021 after the current lockdown, but it is unlikely to be as dynamic as observed in the third quarter of 2020.
First, it appears that winter and indoor activities are more favorable to the spread of the Coronavirus than summer, which raises fears of a gradual easing of lockdown measures more than the first time.
Second, because the message is now clear: As long as there is no vaccine or treatment, the coronavirus will remain and fears of a third outbreak of the pandemic and subsequent restrictions will remain.
Unfortunately, households or businesses will not be able to rule out a third shutdown from their outlook, as a result it is likely that there will be more caution when the second shutdown ends and this could impede the recovery.
Of course, the French government has taken a whole series of measures to try to alleviate the worst economic problems the country is facing and hopes that the economy can recover very quickly.
Although there is a temporary unemployment system, subsidies for closed companies, and government loans and guarantees, these emergency measures alone will not restore confidence.
In particular, you will need to monitor household consumption, which contributed strongly to the recovery of the economy after the first close and was only 2.3% below the pre-crisis level at the end of September.
One reason for this is that the labor market, and thus household purchasing power, has not been severely affected thanks to the temporary unemployment mechanism that avoids layoffs.
However, as the crisis deepens and the overall economic situation deteriorates, consumers are likely to adopt more cautious behavior.
Declining consumer confidence and rising job concerns are worrisome, business investment is also likely to remain sluggish for a long time.
French exports are likely to remain affected by the crisis in 2021, as they are concentrated in the sectors hit hard by the health crisis, including aviation and international tourism, which will take time to recover.
We also do not forget the boycott of French products that continue until now, which has lasted for a whole month and until now we do not have data on the losses of French companies, but their continuation will have an important impact as well.
Security crisis in France
The European country suffers from conflict with Islamists and extremists, as well as increasing sensitivity between the Christian and Islamic right, while Macron tries to satisfy the extreme right in order to win the elections for the second time.
It works on this by publishing insulting cartoons of the Prophet Muhammad in schools and educational institutions and punishing students who object to this.
This transforms France from an attractive country for tourism into a country that you can fear traveling to at the present time and in the short and medium term as well.
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