An employee checks the temperature of a shopper at a supermarket in the French Riviera city of Cannes, southern France, on April 08, 2020, on the twenty-third day of a strict lockdown in France to stop the spread of COVID-19 (novel coronavirus). (Photo: AFP)
The French economy is expected to contract a worse-than-expected eight percent this year, reflecting the impact of an extended coronavirus lockdown until May 11, Finance Minister Bruno Le Maire said Tuesday.
Le Maire had previously targeted a six percent GDP decline for this year but that was based on a lockdown that lasted just one month, instead of the two-month period announced by President Emmanuel Macron in a televised address Monday night.
Le Maire told BFM television that the eight percent forecast would be included in a new 2020 budget programme set to be unveiled this week.
But he cautioned that given the uncertain outlook for economies across the globe, not least in the United States and Asia, "these forecasts need to be considered with caution."
The massive relief effort for bars, restaurants, hotel, shops and other businesses closed during the lockdown will push France's budget deficit up to nine percent of GDP this year, Budget Minister Gerald Darmanin said separately in an interview with France Info radio.
"Each day, each week of confinement... is worsening our public finances," he said, adding that France's debt pile would soar to 115 percent of GDP, up from just under 100 percent last year.
Both forecasts are well above the limits set by the EU's Stability and Growth Pact, which call for deficits to be capped at three percent of GDP, and a debt-to-GDP ratio of 60 percent.
But EU officials have already signalled the rules will be suspended as governments scramble to contain the economic fallout and prevent mass bankruptcies and layoffs.
Le Maire said government aid for smaller companies at risk of going under, after losing at least 50 percent of their revenues, would be raised to as much as 5,000 euros ($5,470) up from 1,500 euros previously.
The total amount of this rescue fund would now reach seven billion euros, he said.