France forecasts 6% GDP plunge this year due to coronavirus

The French capital's finance district of La Défense looking deserted during the coronavirus lockdown.
The French capital's finance district of La Défense looking deserted during the coronavirus lockdown. © Martin Bureau, AFP

The French government expects GDP to drop six percent this year because of lost business during the coronavirus lockdown, Finance Minister Bruno Le Maire said Thursday while announcing a relief plan would be more than doubled to 100 billion euros ($109 billion).

Advertising

The spending will sharply increase the national budget deficit to 7.6 percent of GDP for 2020 — well beyond the eurozone's limit of three percent — and push up public debt to 112 percent of GDP from the 99 percent forecast earlier this year, Le Maire told financial daily Les Echos.

"This debt is necessary to keep companies from going bankrupt and our economy from sinking," Le Maire said in a joint interview with Budget Minister Gerald Darmanin.

"There are still uncertainties and this forecast could still change, depending on how long this confinement lasts and how we come out of it," he said.

The additional health spending alone for the coronavirus fight will be lifted to seven billion euros from two billion euros, Le Maire said, ahead of presenting a new 2020 budget next week.

France is already in recession after its economy shrank a whopping six percent in the first quarter alone, with nationwide business closures and stay-at-home orders in effect during the last two weeks of March.

The French central bank said it was the country's worst performance since World War II, and warned that economic activity had plunged by 32 percent since the lockdown began.

(AFP)

Daily newsletterReceive essential international news every morning