France's economy suffers a record downturn due to coronavirus lockdowns

French economy contracted by a record 13.8% in the second quarter under the impact of coronavirus lockdowns, the national statistics institute INSEE said on Friday. The seasonally-adjusted quarter-on-quarter drop in GDP was better than forecast but worse than the performance of most of its Eurozone peers, the data show.

"GDP's negative developments in first half of 2020 is linked to the shut-down of 'non-essential' activities in the context of the implementation of the lockdown between mid-March and the beginning of May," INSEE said in a statement. The statistics institute also updated the figure for the first quarter, when lockdowns had just begun to be implemented, to a 5.9% contraction, from the 5.3 % it had previously estimated. The second quarter figure means the French economy has been shrinking for three consecutive quarters and continues to be in recession.

France's second quarter contraction was much sharper than the record 10.1% fall in Germany. Austria suffered a 10.7% contraction and Belgium 12.2%. Spain recorded a sharper 18.5% plunge in second-quarter GDP.

France's drop was better than INSEE's own forecast from mid-June of a 17% drop. The central bank had meanwhile estimated a 14% fall at the beginning of July.

Domestic consumption is the main driver of the French economy and household consumption fell 11% during the quarter. Investment fell by a greater amount – 17.8%. Unsurprisingly given the lockdowns and travel restrictions hitting international tourism, there was a nearly 46% drop in transportation and a 57% drop in the restaurant and hotel sector.

The French government has taken extraordinary measures to support businesses during the crisis and keep people in pay even when there is little work."We are going to fight to do better than the minus 11% forecast for the entire year by the government”, Finance Minister Bruno Le Maire said.

More on this subject: Coronavirus

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