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Rapid rebound? What’s the latest outlook for the French economy in 2020

France's economy, pushed into a bruising recession by the coronavirus crisis, is poised to bounce back now that lockdown measures are lifted but will still contract over the year as a whole, official data showed Tuesday.

Rapid rebound? What's the latest outlook for the French economy in 2020
French President Emmanuel Macron and Economy Minister Bruno Le Maire (left) hope to boost businesses with the new recovery plan. Photo: AFP

France's gross domestic product, which shrunk by a record 13.8 percent in the second quarter, is forecast to grow 17 percent in the subsequent three months, the national statistics office Insee calculated.

But the projected rebound is not quite as strong as expected, and Insee said it was sticking to its forecast for an overall economic contraction of 9 percent for the year as a whole, while unemployment is projected to rise.

Although the easing of lockdown measures “has enabled a relatively rapid rebound in parts of economic activity,” the economy is returning after the summer break “rather like an engine that is being cranked up and choked off at the same time,” Insee said.

“The choking off is being done by the health situation and the virus that is still actively circulating,” Julien Pouget, head of Insee's macro-economic division, told AFP. 

“But it's being cranked up by economic policies put into place with massive emergency aid and the recovery plan.”

ANALYSIS: Will Macron's €100,000,000,000 rescue plan be enough to save France?

Insee pointed to the risk of a “significant shock to demand,” with consumer spending and household confidence expected to remain below pre-crisis levels.

As a result, the economic rebound will be “less rapid” between now and the end of the year, the agency predicted.

Pouget said that many companies had now returned to their usual level of business.

“But the toughest challenges remain for the badly affected sectors because they are suffering from the health crisis,” he said.

The transport, hospitality and events sectors continued to struggle, he added.

The French government is officially still pencilling in a contraction of 11 percent in 2020, but Finance Minister Bruno Le Maire has hinted that officials were preparing to release a less pessimistic number this month.

Unemployment is likely to rise to 9.5 percent by the end of the year, Insee said, 1.4 percentage points more than at the end of 2019.

Some 715,000 French jobs were destroyed in the first half of the year alone, it said.

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ECONOMY

France warns winter gas cuts possible

The French government warned Wednesday that companies might have to reduce energy use this winter even with the country's natural gas reserves at full capacity, as Russia continues to reduce its gas exports to Europe.

France warns winter gas cuts possible

“The main players, government agencies and businesses, must reduce their consumption” of gas as well as electricity, because “the two systems are linked,” Energy Minister Agnes Pannier-Runacher told CNews television.

Moscow has slashed its exports to Europe in response to punishing Western sanctions over the invasion of Ukraine by Russian forces, forcing countries to scramble for alternatives.

Even though France is less reliant on Russian supplies than other EU countries, generating around three-quarters of its electricity from nuclear power plants, its industrial sector still relies on gas and millions of people use it to heat their homes.

Winter shortfalls will be a risk even though France is racing to top up its gas reserves.

“Right now our strategic gas reserves are at 80 percent capacity… which means we will reach our goal of 100 percent before November 1,” Pannier-Runacher said.

But she later insisted on RMC radio that full stocks might not be enough to avoid gas cuts as the government seeks alternative sources.

“It’s not so simple… We might have a particularly cold day and because of the size of the pipelines, we can’t pump all of the gas we have,” she said.

And France is also facing a winter with fewer of its nuclear plants online because of either maintenance or safety concerns, meaning that electricity supplies could be strained.

“We are counting on solidarity, notably with Germany, to import electricity,” she said. “And we need to support Germany with the gas we import via our liquefied natural gas terminals.”

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