Exit scenario: optimism prevails.
The current crisis is likely to be marked by a strong rebound in the economy in 2021. However, health confidence, household behaviour and an ambitious economic policy are key to ensuring a strong exit from the crisis.
Whatever it takes has been quite successful. In 2020, French GDP fell by 7.9%, according to the latest INSEE estimates published in May 2021. The recession is however less severe, since Bercy predicted in October 2020 a fall of 11% of GDP.
If the estimates are more accurate, it is mainly because the economy has resisted the second containment better than the first. A reassuring scenario that could be confirmed in 2021 and 2022. "The government has calculated the measures and aid rather well. It has notably developed the solidarity fund to cover a larger part of the losses of companies. The productive fabric remains fairly preserved with very few bankruptcies. In 2020, when the sanitary constraints were lifted, we observed a strong rebound in the economy, one of the strongest in Europe. We are expecting rather good surprises and therefore believe that the economic scenario for the end of the crisis will be positive," says Mathieu Plane, economist and deputy director at OFCE.
In 2021, growth was estimated by the OECD at 5.8%. According to the OFCE, it would be 5% in 2021. "Our forecasts are quite reasonable. The economy could return, during 2022, to a level of GDP per capita equivalent to that of the end of 2019," says Mathieu Plane.
Businesses, which have made extensive use of the support measures, have clearly been an asset. They have proved to be more robust than expected. "This is quite surprising. Business leaders have not integrated this crisis as a lasting one," says the economist.
Pascal Ferron, vice-president of the network of accountancy firms Walter France, also observes a very strong resilience of managers. "We are noticing a gap between the alarmist forecasts and the reality on the ground. A large majority of companies, in industry and communication, have already recovered and are recording a turnover in 2021 that is higher than the first quarter of 2019. Many have used this period to invest, redefine their customer strategy and redesign their business processes. When they felt that vaccination started to gain momentum, they let go," he explains.
If the OFCE is betting on a vigorous rebound, this solid exit from the crisis is achievable if the health agenda is respected, and if, by the end of June, the complete reopening of the sectors, the gradual reduction of gauges with a fairly strong recovery in consumption are maintained.
The other major stake for the quarters to come, according to Mathieu Plane, lies in the behaviour of households as they come out of the crisis and the use they will make of their savings. Since the pandemic, the French have set aside 100 billion euros in savings for 2020 alone. "If households give up the small amount of savings to consume 20% of their savings, growth would be 6% in 2022. That is a gap of two additional points of growth, compared to a conservative scenario of storage, says the economist. The number of jobs created or preserved would be 200,000 above that of a scenario without dissaving and the unemployment rate would end up at 8.7%. "
This potential growth also depends on the productivity of the factors of production, the treatment of the crisis for companies. "The productive fabric has been preserved, but the remaining burden is not negligible. During the years 2020 and 2021, there will be 90 billion in financial losses that will have to be absorbed in the balance sheets of companies, which may jeopardise the solvency of many of them in the transport services, accommodation, catering, construction, entertainment and events sectors," explains Mathieu Plane.
These sectors are still recording losses of between -12% and -28% in 2021 (compared to 2019), whereas the average for other sectors of activity is less than -2%. They account for only 12% of GDP, but contribute to 60% of activity losses in 2021. "It will therefore depend on the financial capacity of these VSEs and SMEs to repay and manage the 140 billion EGP, if new aid schemes are not put in place by then," adds the economist.
To further hasten the end of the crisis, social policies would be well placed to respond to the medium-term challenges. "We need to restore people's confidence through reassuring communication and the introduction of additional aid for the most distressed households, young people and the self-employed," says Pascal Ferron.
Exit pathways from the crisis also depend on structural, more global changes. "By the second quarter of 2021, the US economy's GDP will have returned to its pre-Covid level. The United States uses debt as a lever to transform its economy and strengthen its growth. With the Biden plan and the plans passed since the pandemic, the country has supported the economy by 23 points of GDP over three years, whereas France is at ten points. We certainly need to go further, to set up investment plans for productive supply, for economic transformation, R&D, training, digital technology, transport and energy," says Mathieu Plane, who is thus considering the question of a new growth model.