Covid and the Fifth Wave: Is Economic Recovery Threatened?

Good so far … When the fifth wave of Covid dominates France, the economic implications of this new epidemic outbreak are in everyone’s mind. Can it upset the ongoing recovery? Bercy uses optimistic cards. The Ministry of Economy’s lookout prefers to point out indicators that reveal the strength of the recovery. Most sectors, except automobiles, aviation and international tourism, are more active than they were before the pandemic. According to the latest INSEE survey, the business environment is now approaching spring 2018 levels. The unemployment rate was the lowest in 13 years, and the participation rate in the labor market between the ages of 25 and 64 has not been so high since 1975.

6.25% growth in 2021

“A year ago, we talked about bankruptcy, zombie companies, and the surge in unemployment, but the story is completely different,” says one of the Treasury Departments. In fact, Bercy expects a 6.25% increase in GDP this year as well. This is slightly lower than the average forecast by private institutions. sauce.

In fact, companies have learned to live with Covid for months. Barrier measures, wearing masks in closed spaces, teleworking that can be activated at the last moment if needed, in-store measurements, online sales and more. The tools are there. In fact, the economic impact of the various waves becomes less and less important over the months. Directorate-general estimates show that activity plummeted by nearly 30% in the first wave of spring 2020, while it shrank by only 6% in the second wave and 1% in the third wave. Almost zero during the fourth. But even if the agenda does not include strict confinement such as Spring 2020 or the hypothesis of non-essential store closures, the rate of increase in recent Covid cases is questionable as Christmas approaches. Throw.

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For the time being, Bercy accountants are worried about supply chain disruptions. In industry and food raw materials, semiconductors, wood, plastics … so many companies, and above all in the automotive industry, production is limited by supply constraints. The order remains on hold.

But what is starting to worry economists is, among other things, inflation drift. In France, we were able to quickly exceed the 3% annual standard, a level not seen for years. In Germany, the kingdom of easing, consumer prices have risen by nearly 6% annually, but the eurozone as a whole has not been so high since 2008.

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The waltz of the label, which is mainly explained by the possible temporary rise in energy prices. However, it can also stimulate demand for higher-than-expected wage increases and undermine the company’s already vulnerable competitiveness. This is the famous “price-wage” loop that economists fear. However, recruitment needs are increasing. According to the latest figures released by URSSAF today, employment for more than a month (excluding temporary staff) is almost 14% higher than pre-pandemic employment. The number of permanent contracts signed shows a 12% surge compared to February 2020! For now, everything is fine …


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