French economy to shrink record 11 percent this year

13:26 | 03/06/2020 Cooperation

The French economy is expected to shrink a record 11 percent this year because of the coronavirus crisis, which is worse than the government's previous forecast of an 8 percent contraction, Finance Minister Bruno Le Maire said Tuesday.

People line up outside a bakery in Paris, France, on May 22

France imposed one of the Europe's strictest lockdowns in the face of Covid-19 in mid-March and only began removing restrictions on May 11. Cafés, bars and restaurants were allowed to reopen for regular business on Tuesday. but in Paris they remain limited to outside seating only.

"We were hard hit by the virus, we took effective measures to protect French people's health, but the economy practically ground to a halt for three months," Le Maire said.

"We're going to pay for it with growth," he said.

With some 300,000 cafés and eateries reopening on Tuesday, Le Maire said that they would continue to benefit from handouts from a government solidarity fund until the end of the year to help cover fixed costs.

"Even if it is hard to hear on a day when the sun is shining and the cafés are reopening, the hardest part is still ahead of us in social and economic terms," Le Maire said.

The government has progressively revised upwards the damage caused by the pandemic and the latest estimate will be included in a recovery budget that will be submitted to ministers on June 10.

Last week, the official statistics agency INSEE warned that the economic contraction would be much larger than the government's previous estimate of eight percent, because the pickup as the virus lockdown was eased would only be gradual across the second half of the year.

The government is trying to avert a string of retail bankruptcies by seeking buyers for big clothing chains Camaieu, Conforama and La Halle, which employ thousands of people, Le Maire said Tuesday.

The minister has already announced sector-specific support plans for the tourism and car industries this month. He said measures for the aerospace industry were being prepared for next week and the start-up and building sectors would follow afterwards.

Le Maire also announced that traditional mid-year sales by retailers would be pushed back to July 15 instead of June 24.

He said the delay had been requested by small-business owners who needed more time to prepare after being closed for more than two months.