Emerging from the crisis: a strong start, a more modest recovery

06/05/2021 - Alan Lemangnen, Economist France, Societe Generale

The French economy has proven itself to be surprisingly resilient in the face of the pandemic crisis. As the machinery of production was broadly preserved in 2020, resumption should be quick this year. However, our forecasts are cautious for the longer term: recovery will certainly happen, but it might be more modest than the consensus expects.

Surprising resilience

Three aspects of France’s economic performance took economists by surprise in 2020.

Firstly, revenues reduced by much less than was anticipated. While the more pessimistic among us were expecting a contraction of 13.5% over the year, actually GDP “only” reduced by 8.2%. The French economy closed the year 5% below where it was pre-crisis, performing better than the rest of the eurozone.

Next, the wave of bankruptcies feared by many never came. The number of bankruptcies was actually down 45% over the year, and that goes for all sectors and all regions without exception, and specifically for SMEs.

Lastly, the decline in employment was less severe than expected. The French economy cut 310,000 jobs in 2020 – just as many as in 2009, even though reductions in GDP were three times stronger in 2020.

The first factor in explaining this resilience is that the cost of the lockdown measures decreased over time, indicating more accurate calibration as well as improved adaptation to the public health context. So, the first lockdown cost €16 billion a week, compared to €3.5 billion for the third.

The second underlying factor is that the support systems seem to have been effective. For example, economists at the French Treasury have estimated that emergency measures helped reduce the proportion of illiquid companies by 12 percentage points, compared to a scenario without state support, and the proportion of insolvent companies by 5.3 points1.

A fast restart but more moderate recovery

This resilience will make restarting easier once the public health protection measures have been lifted. It is what we saw in the wake of the first lockdown: GDP had rebounded 18.5% in Q3 2020. We think this scenario will be repeated in 2021: at 6.5%, our growth forecast is therefore higher than the consensus would expect (5.3%).

However, will this restart evolve into lasting recovery over the long term? In this, we are more cautious. Firstly, it is very likely that a portion of the €100 billion in savings that households accumulated in 2020 will become sustainable. This is because, on one hand, unemployment will likely increase from 2021 and, on the other, this increase is concentrated among households with a lower marginal propensity to consume, i.e. the wealthier households2

At the same time, the crisis has weakened companies’ levels of capital. Certainly, the equity loans,  potentially of up to €20 billion, will certainly give balance sheets a boost, but it is still difficult to assess whether or not this will be enough to guarantee that investment quickly catches up.

Finally, from 2022 onwards, fiscal policy could become restrictive. The government is therefore forecasting consolidation of 2.2 percentage points of GDP in 2022. That is a considerable effort.
As a result, counting on growth of 4% in 2022, as the consensus expects, seems optimistic. We feel that a figure half as high sounds more reasonable. Nothing to really make us doubt the recovery. It just looks likely to be a little more modest.


1 HADJIBEYLI B., ROULLEAU G., BAUER A. (2021), L’impact de la pandémie de COVID-19 sur les en-treprises françaises [The impact of the COVID-19 pandemic on French businesses], Trésor Eco No. 282, April 2021

2 According to a study published by the CAE in October 2020, almost 70% of the €50 billion increase in accumulated savings as at August 2020 can be attributed to 20% of households: those in the highest income deciles.


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