French Economy Contracts Most Since 1945 On Covid-19 Shock

France’s economy collapsed in the first quarter as the sharpest pace since the World War II as the spread of the coronavirus, or Covid-19, and the consequent lockdown hurt economic activity, Bank of France said Wednesday.

Gross domestic product shrunk 6 percent in the first quarter of this year, the bank estimated. That is the worst performance since 1945.

The French economy had shrunk 0.1 percent in the fourth quarter of 2019. Another contraction in the first quarter would push the economy into a technical recession.

The bank had forecast 0.1 percent growth for the first quarter in February.

The bank was forced to revise down its GDP growth estimate due to the containment measures taken in response to the Covid-19 outbreak.

The country went into a lockdown on March 17 and it will last till April 15. Reports suggest the government may decide to extend it if the situation does not improve as expected.

“We have to go back to the second quarter of 1968, marked by the events of May, to find a quarterly drop in activity of the same order of magnitude,” the bank said.

“GDP then fell by -5.3 percent, before rebounding by +8.0 percent in the third quarter of 1968.”

One third of economic activity was hampered in the first quarter amid declines in most sectors, the bank said. Based on a sectoral approach, the loss of activity over a typical week of confinement is estimated at -32 percent in the economy as a whole, the bank said.

“Each fortnight of confinement is set to reduce the level of annual GDP by almost 1.5 percent,” the BoF said. The strongest activity losses were seen in construction and the trade, transport, accommodation and catering sectors.

The central bank cautioned against extrapolating these projections improperly. “It is indeed possible that the loss of GDP per fortnight may change as the cumulative duration of confinement lengthens,” the bank said.

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