The economy has recovered, but is maintaining a recovery period

“New growth record!”, Tweet in a hurry Election When Activist Macronist in publication at the end of January for 2021 figures by INSEE. At a better than expected rate of 7%, the French economy has returned to a height unknown since the 1960s.

But before achieving this historic growth, France experienced an even more historic recession of 8%, so high levels are not a big surprise. However, in many cases, the stronger the fall, the higher the rebound.

There is always a recovery period after the crisis, and then growth slows as it catches up to resume cruising speed (if the recovery is properly coordinated or not broken as it was after the sovereign debt crisis …). .. It’s not surprising that this is a much lower forecast for 2022. The IMF’s forecast released in January is 3.5%, but do you hear macronists screaming that growth has been cut in half at the end of the year?

The presentation of such does not please Bruno Le Mer, who describes the rebound as follows: “Spectacular”.. “It’s not mechanical at all!” »»Minister of Economy protests with Mike in Europe 1 in early February, France “The only major country in the euro area that has rapidly returned to pre-crisis activity levels”And attribute this result to the recovery plan as “whatever you need”.

In fact, in the third quarter of 2021, the French economy generated more wealth than in the fourth quarter of 2019, but that is not the case in Italy, Spain and even Germany. How would you describe it?

Rebound thanks to service

Obviously, without government support, the economy would have plummeted further and would have taken longer to recover. Cepremap’s calculations by themselves account for 85% of the losses avoided in the last two years, whatever the cost. Partial activities have made it possible to maintain employment and household income, but solidarity funds in particular have also allowed us to limit bankruptcy. As a result, both production and consumption were able to respond quickly to their respective relaxation of health restrictions.

Sure, this policy cost hundreds of billions of euros, but according to Cepremap’s memo, it would have been even more debt without public intervention. On the other hand, the fact that the government subsidizes companies that don’t really need it, and above all, that the government doesn’t need a corresponding company, is more suspicious.

However, other countries also often spend more than France. It also explains why the United States is far above pre-crisis levels. Therefore, this reason is not sufficient.

Analyzing this 7% growth shows that the contribution of foreign trade is small (0.2 out of 7), so the main part is domestic demand.

Growth was driven by investment, in addition to public consumption (such as health care costs), which was 4.1% higher than at the end of 2019 at the end of 2021. The latter is 1.9% above pre-crisis levels and is driven primarily by market services (10.6% above!), Especially IT.

Finally, household consumption, the usual driving force for France’s growth, has just returned to pre-Covid levels. Services are above the end of 2019 level (+ 1%) and products are below (-2.4%). ).

Therefore, France’s growth is largely driven by both public and private services, and its activities are now higher than pre-crisis levels. Obviously, some sectors, especially accommodation and catering (-16.1%), continue to be hampered, but others benefit from the strong dynamism of telecommunications (+ 11.2%). Conversely, the industry is struggling and its activity remains 4.7% lower than at the end of 2019.

Germany further hindered its recovery

Unlike France, Germany is more dependent on external demand due to the heavy weight of industry and exports in its economy. But on the other side of the Rhine, momentum is hampered by supply difficulties that have continued to increase since last spring.

“Manufacturing export orders have reached record levels, benefiting from strong global demand, but a shortage of raw materials and intermediate products has reduced industrial production. Weighs heavily on the automotive industry in particular »Refers to the OECD December report.

When international trade becomes unstable, the German economy is always punished. When Donald Trump launched the trade war in 2018, the country’s growth was stagnant. France, which has less influence, recorded a better rate, but Bruno Le Mer was proud. Strange for the minister dreaming of re-industrialization …

In addition, apart from the economic structure, vaccination campaigns also had an impact. In November, 75% of the French made a complete plan, but this only applies to 67% of the Germans, which the Federal Republic blamed. “I’m lagging behind my European partner”Emphasizing the OECD, and therefore the pandemic weighed heavily on economic activity “Especially in areas where vaccination is delayed”..

Conversely, in Spain, 80% of the population had a complete vaccination schedule, but the weight of tourism still has a major impact on the economy due to the health crisis. According to the OECD, travel restrictions, especially international regulations, have hit the sector hard, accounting for 12% of the country’s pre-pandemic GDP and half of its service exports. In France, tourism accounts for 6% of the economy, one-fifth of service exports, and foreign tourists account for only one-third of visitors.

The economy is still recovering

Finally, Bruno Le Mer guaranteed this rebound in France 2 at the end of January. “Erase the crisis”.. Indeed, the French economy has been able to generate as much wealth in a quarter as it did before the crisis since last summer, but not in the previous quarter. According to INSEE, the annual average GDP in 2021 is 1.6% below the GDP in 2019. The economy is doing well, but it’s still recovering and the pandemic isn’t over.

“This relatively good condition of the French economy at the end of 2021 needs to be carefully evaluated. The situation is certainly not stable. The French economy is still in a persistent impact of the Covid-19 crisis and in good health. Are at risk of further deterioration.Warn the creator of the Cepremap note.

Moreover, if there were no health crisis, the economy would have been on the way and at a certain level. Has France regained this level? Not always. According to OFCE calculations, GDP is still 1.7 points below the pre-crisis trend. This performance is much better than Germany and Spain, but not as good as Italy and the United States. This catch-up depends on how the exit from the crisis is managed, hoping that the scenarios from 2008 onwards and from 2010 to 2011 onwards will not be repeated. As Cepremap shows, the economy has never returned to the 2007 trend.