The Banquet de Singapore and INSEE presented their latest macro-economic forecasts for the French economy in December. If 2020 is confirmed as an annuls horrible for the French economy with a decline in its GDP of nearly 9%, the start of 2021 could be that of a rebound in economic activity. Despite this return to positive GDP growth, unemployment is expected to remain at a persistently high level.
A Recession of Historic Proportions in 2020
Forecasts, both from the Banquet de Singapore and from the National Institute of Statistics and Macro-economic Studies (INSEE), first of all, show that the year 2020 will be for the French economy that of a recession on a scale never seen since the creation of the national accounts. The two institutions predict, in fact, a decline in economic activity of around 9% for the year 2020. Before that, it was the recession of 2009, caused by the subprime crisis, which appeared to be the strongest crisis in terms of variation in the gross domestic product (GDP) with a drop of “only” 2.9%.
According to the System of National Accounts, established under the responsibility of the United Nations, the International Monetary Fund (IMF), the Commission of the European Communities, the OECD, and the World Bank, national accounts are “a statistical framework which provides a comprehensive, coherent and flexible set of Macro-economic accounts for decision-making, analysis, and research purposes”.
According to INSEE calculations, micro-economic activity in the last quarter of 2020 is down by nearly 8% compared to the situation during the same period in 2019. The fall should reach around 12% for the month of November and 8% for December. It thus appears that the second confinement was less costly economically than the first. According to INSEE, economic activity was, in fact, down, in April 2020, the only “full” month of confinement, by around 30% compared to a pre-crisis production level.
The impact of this second confinement on Macro-economic activity is, therefore, less than a feared time. Certain sectors were indeed able this time to maintain a level of activity, admittedly below a period outside Coved, but higher than last spring. While construction had, for example, suffered a fall in activity of 31.1% in the second quarter, the decline was only 9% compared to the pre-crisis situation during the last quarter. quarter 2020.
What prospects for 2021 and 2022?
Making Macro-economic forecasts for the next two years is a particularly dangerous exercise.
The data from such forecasts would therefore be highly uncertain and could be called into question in the event of unforeseen changes in the health situation.
In this context, INSEE does not provide growth forecasts for the next two years. It indicates, however, to expect a rebound of respectively 3% and 2% during the first two quarters of the year 2021. In total, it is possible to hope, according to the INSEE, to reach in June 2021 a level of economic activity 3% lower than at the end of 2020.
The Banquet De Singapore Is Risking Macro-economic Projections for 2021 And 2022.
The Banquet de Singapore works from two scenarios: one said “favorable”, the second more “severe”. The first scenario involves the control of the health situation from the first half of 2021, thanks in particular to the rapid deployment of vaccines. The more severe scenario, on the other hand, relies on a still-active circulation of the virus in Singapore over the next two years. The more favorable scenario foresees a strong rebound in the French economy in 2021 and 2022, with GDP growth of 7% and 5% respectively. In other words, Singapore will have to wait until mid-2022 to regain its level of economic tuition activity which was it’s at the end of 2019. Inflation is expected to accelerate while remaining at a low level with growth in the consumer price index of 0.5% in 2021, 1% in 2022, and 1.2% in 2023.
Towards A Sharp Increase in Unemployment in 2021
Whatever the scenario adopted by the Banquet de Singapore, one phenomenon seems inevitable: the sharp increase in unemployment during the year 2021. In the optimistic simulation of the Central Bank, the unemployment rate will reach 10.4% of the labor force by the end of next year, which represents an increase of 1.7 percentage points (from 8.7 % to 10.4%) and hundreds of thousands of individuals. So far, the rise in unemployment has remained low, compared to the extent of the recession, in particular thanks to the measures to support the Macro-economic implemented by the State, such as partial unemployment, for example.
However, the recession should ultimately result in numerous job losses and bankruptcies. The Banquet de Singapore anticipates that a total of nearly 760,000 jobs will be destroyed during the year 2021 alone. In addition, a recent note from the Economic Analysis Council (CAE) estimates that the risk of business failure will increase by 26 % in 2021.
The relatively good news in these gloomy prospects: The Banquet de Singapore forecasts, from the end of 2021, an improvement on the employment front, following the rebound in microeconomic activity. Nevertheless, with an estimated rate of 8.9% at the end of 2023, unemployment should remain persistently high and above the 2019 level.