Insee Analyses · May 2021 · n° 64

The French economy in 2020: a year of upheaval

In 2020, GDP in the euro area fell by 6.6% as a result of the global COVID-19 pandemic. All branches contributed to the fall in total value added. However, trade, transport and accommodation and food services were particularly affected. The fall in private consumption, particularly in services, is a direct consequence of the health crisis and the restrictive measures taken against the pandemic’s spread.

In France, GDP fell by 7.9%. The sectors most affected by the effects of the pandemic and the health restrictions directly account for half of the overall loss of activity, or 5 points of GDP, and, in total with the indirect cascading effects, 6 points of GDP.

On the business side, thanks to public support, savings by non-financial companies have fallen less than their value added. In total, business investment fell by about 9 percent, whereas, according to the evolution of its usual determinants, it could have fallen by about twice as much.

On the household side, purchasing power increased slightly (+0.4%), thanks to the support measures. During 2020, household consumption fell by 7.0%. The changes in consumption reflect the effects of the pandemic, the restrictive measures and the adaptation of household behavior to them. Household savings increased, exceeding its 2019 level by more than 90 billion euros as well as its expected amount given its usual determinants.

In 2020, salaried employment fell sharply (-284,000), returning at the end of the year to a level comparable to that of mid-2018. However, the decline was limited in relation to the fall in activity, due to the massive use of the partial activity scheme. This is also reflected in the evolution of the unemployment rate, even if it loses its meaning in a period of confinement: at 8% at the end of 2020, it is close to its level at the end of 2019.

To mitigate the effects of the decline in economic activity, the government has provided substantial support to households and businesses. Its spending has surged while its revenues have fallen: the public deficit has risen sharply to 9.2 per cent of GDP. Thus, most of the loss of national income was absorbed by the general government.