2020 is coming to an end and will remain a most unusual year as far as the economic outlook is concerned. Ten months after the start of the first lockdown, the health situation is still the main determining factor of economic activity. The lifting of restrictions after the second lockdown is already underway but is more gradual than for the first, given that uncertainties persist about the short-term development of the epidemic. Nevertheless, as expected, analysis of aggregated bank card transaction amounts shows that the reopening of “non-essential” businesses at the end of November resulted in a rebound in household consumption.

Our estimates for Q4 2020 have therefore been refined, in order to include the most recent available data and also new information on the pace at which health restrictions are expected to be eased. Household consumption, which would appear to have plummeted in November to 15% below its pre-crisis level, is expected to reduce this gap by almost two-thirds in December and return to 6% below its Q4 2019 level. The contrast between November and December is likely to be a little less marked in terms of gross domestic product (GDP), with a loss of activity estimated at 12% in November then back to 8% in December. All in all in the last quarter, activity looks set to fall to 8% below its pre-crisis level (the gap was reduced to 3.7% in Q3), a decline of about 4% as a quarterly variation.

Employment is also likely to suffer as a result of this second lockdown: after the strong rebound observed in Q3 (+400,000 net job creations between the end of June and the end of September), payroll employment looks set to decline once again in Q4 2020 (–300,000 forecast). The labour force is also expected to contract, as it did during the first lockdown, as a result of the difficulty associated with looking for a job under these circumstances.  Another artificial drop in the unemployment rate is then likely (8% forecast for the end of the year, after 9% in Q3); in contrast, the halo of unemployment is expected to increase sharply.

As an annual average, the order of magnitude of the decline in GDP in 2020 is confirmed at –9%. It is interesting to look at a breakdown of this decline according to the three approaches to GDP in national accounting terms (production, demand, income).

The “production” approach reflects the strong sectoral contrasts inherent to the current crisis, with losses of activity largely dependent on each sector’s degree of exposure to the health containment measures. Thus the 9-point decline in GDP during the year is due more than anything to a decline in market services (contribution of 5 points), especially transport, accommodation-catering, trade and services to households. Construction, industry and other services were also affected, notably during the first lockdown, before learning to “live with the virus” via health protocols and teleworking.

According to the “demand” approach, nearly 8 points out of the 9% decline in GDP are linked to the contraction in domestic demand and 2 points to the contraction in foreign trade, while conversely, the contribution made by changes in inventories was slightly positive. Obviously, all the main items of demand contracted in 2020 and the decline in household consumption (which represents over half of GDP) has played a significant part in this contraction. However, household consumption tumbled less than GDP, in contrast to exports.

Finally, the “income” approach reflects the massive fiscal support measures which were intended to protect income and the productive fabric, despite disparities between households or between businesses. Thus, as an annual average the purchasing power of households’ gross disposable income is expected to decline by “only” around 0.3% in 2020, and by 0.9% when measuring it by the number of consumption units. This reflects in particular the fact that, thanks to the short-time working scheme, employment is expected to fall much less than activity: between Q4 2019 and Q4 2020, 600,000 payroll jobs (700,0000 including the self-employed) are likely to be destroyed, or 2.3% of the pre-crisis level. Meanwhile, the margin rate of businesses is likely to lose nearly 4 points on average over the year.1 Most of the income losses linked to the crisis are likely to be borne by the general government account.

International comparisons remain difficult for several reasons. First, the national accounts have often had to innovate in order to adapt to the unique features of the current period. Such innovations have not necessarily been similar from one country to another. In addition, the health situation, like the economic outlook, remains very changeable. Therefore it is over the long term that comparisons will have to be made. Nevertheless, results from the quarterly accounts and high-frequency data already provide some indications.

It would appear that, compared to other countries, especially Germany, the decline in activity in France in mid-March was more sudden and on a wider scale. But the matching rebound that followed was more clearly defined in France. In particular, at the beginning of the summer, household consumption returned very quickly to a level very similar to its pre-crisis level. In November, the intensity of the epidemic resulted in a second lockdown in France, earlier than in Germany where a significant tightening of restrictions was announced for mid-December.

Thus the economic crisis was clearly triggered by the health crisis: in the short term, its timescale is that of the epidemic. Contrary to previous economic crises where activity in France may have had a tendency to fall back less sharply and then rebound more slowly than in other countries, in this case these movements were on a very large scale in France, especially in the spring. In fact, it was mainly services to households that were hit, whereas in previous crises, they were able to play a role of shock absorber. Even general government production was not spared by the crisis, whereas it is usually not much affected by short-term economic fluctuations. However, as the first lockdown ended, powerful public fiscal support contributed to the economic rebound, which was more dynamic than expected.

In terms of health and the economy, public policies in 2020 had to deal with the most pressing problems: it was a question of taking drastic action to limit the loss of human life, while at the same time dealing with the economy, and trying, despite the storms that were raging, to keep households and businesses afloat.

With 2021, we should see the arrival of some longer-lasting solutions. In particular, the hope is that vaccination will curb the epidemic and so ease the restrictions that weigh so heavily on economic and social life. At the same time, the European economies should be able to look beyond emergency support and benefit from the various recovery plans prepared in recent months.

In the short term, however, the health situation will continue to be the subject of increased vigilance and it is possible that for a few more months, recovery will continue to fluctuate along with the restrictive measures. In addition, there are other uncertainties, not least the terms of Brexit, that are likely to affect forecasts.

We assume that the health situation will gradually stabilise, which would mean that by June we could return to a similar level of economic activity to that of last summer. Our scenario is based, among other things, on the expectations expressed by businesses in the ACEMO-Covid survey. GDP looks set to rebound by +3% in Q1 2021, then by +2% in Q2. As a result, activity in June 2021 should then be “only” 3% below its pre-crisis level. The annual “carry-over effect”2 is then expected to be 6% in mid-2021. This figure is high but above all, it reflects the very low point of 2020. At the same time, inflation, which was virtually zero at the end of 2020, is likely to pick up by June 2021.

However, the story of economic recovery told month by month is going to remain uncertain until mid-2021, with the risk of a new surge in the epidemic representing a sword of Damocles hanging over those activities that are most likely to be restricted by containment measures, activities that nevertheless represent about 10% of French GDP.