The French economy contracted much less than expected at the end of last year, official data released on Friday showed, as the growing prospect of a new lockdown wipes out hopes for a recovery early this year.
The euro zone’s second-biggest economy shrank 1.3% in the final three months of last year after France entered a second coronavirus lockdown in October to contain a second wave of infections, the INSEE statistics agency said.
The slump, which followed an 18.5% rebound in the third quarter after a first lockdown, exceeded expectations for a 4% contraction on average in a Reuters poll of 28 economists, surpassing even the highest estimate of -1.4%.
It also meant that for the whole of 2020, the economy contracted 8.3%, which though France’s worst post-war recession was better than the -11% the government had forecast in its budget plans.
It also eases some of the strain on the public finances as the budget deficit is, therefore, likely to come in at less than the 11.3% of gross domestic product the government had expected.
France is on tenterhooks to find out in the coming days whether the government will put the country under a new lockdown and in particular whether schools will be closed.
“If the restrictions are made harder, it will be very difficult to get any growth” in the first quarter, Euler Hermes France economist Selin Ozyurt.
INSEE said consumer spending surged 23% in December from the previous month as coronavirus restrictions were eased heading into the holiday period, which helped to limit the overall fourth-quarter drop in household spending - the traditional motor of the French economy.
Meanwhile, exports surpassed imports so that foreign trade contributed 0.9 percentage points to fourth quarter GDP while inventory building added 0.4 percentage points.
INSEE said that exports of transport goods and pharmaceuticals had held up well in the period while lower economic activity had limited imports of oil.
Reporting by Leigh Thomas; Editing by Jacqueline Wong & Shri Navaratnam