France GDP Q2 2020


France: GDP records largest drop on record in Q2

July 31, 2020

The economy contracted at the sharpest rate on record in the second quarter as the pandemic and associated containment measures wreaked havoc on activity. In Q2, GDP nosedived a historic 13.8% in seasonally-adjusted quarter-on-quarter terms, according to a preliminary estimate on 31 July. The result marked the third consecutive quarterly contraction (Q1 2020: -5.9% seasonally-adjusted quarter-on-quarter) and the sharpest drop on record. That said, the print beat market analysts’ expectations of a 15.3% decline. On an annual basis, GDP contracted 19.0% in Q2, down markedly from the previous period's 5.7% contraction.

The downturn was broad-based as the lockdown to halt the spread of the virus reached into all areas of the economy. Household spending fell 11.0% in the second quarter, which was below the first quarter's 5.8% contraction. Moreover, public consumption dropped at a quicker rate of 8.0% in Q2 (Q1: -3.5% s.a. qoq), while fixed investment declined at a more pronounced rate of 17.8% in Q2, from the 10.3% decrease logged in the previous quarter.

On the external front, exports of goods and services plunged 25.5% in Q2 (Q1: -6.1% s.a. qoq) amid a depressed global trading environment and disrupted supply chains. In addition, imports of goods and services declined at a sharper rate of 17.3% in Q2 (Q1: -5.5% s.a. qoq). Taken together, the external sector as a whole subtracted 2.3 percentage points from the headline reading, following the 0.1 percentage point subtraction in Q1.

Commenting on the outlook for the French economy, Tullia Bucco, economist at UniCredit Bank, noted:

“While GDP has troughed, the pace of normalization of economic activity remains surrounded by great uncertainty since it depends heavily on the epidemiology of the virus. We expect that a relatively rapid technical rebound in 3Q20 might be followed by materially slower growth later this year as the medium to longer-term costs of the crisis become clearer. Manufacturing sectors more dependent on foreign demand, such as aeronautics, luxury goods and alcoholic beverages, are already visibly struggling to recover past losses in activity, and will most likely face subdued demand for a protracted period of time. Meanwhile, the relatively rapid recovery underway in the service sectors could lose a lot of traction as pent-up demand is exhausted and it remains exposed to possible reversals in the behavior of households and businesses.”

FocusEconomics Consensus Forecast panelists project GDP contracting 9.5% in 2020, which is down 0.2 percentage points from last month’s forecast. In 2021, they see it rebounding and expanding 6.7%.

Author:, Economist

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