French restrictions won't be as damaging as previous lockdown

[PARIS] France's economy will take a smaller hit from the new lockdown to contain the spread of Covid-19 than it did during the tighter restrictions on activity earlier this year, according to the country's central bank.

Business leaders in industry and construction expect a much milder decline in activity because they face fewer limits on operations and new health protocols allow more employees to continue, a survey by the Bank of France showed.

But the French economy is in a highly uncertain phase as the government could revise restrictions or even extend the lockdown, depending on the evolution of the pandemic. There's been little sign of respite, with a record increase in confirmed infections at the end of last week and intensive care units nearing capacity with Covid-19 patients.

The Bank of France estimates activity in November during the lockdown will be 12per cent below the pre-crisis normal level. While that's far less than the 31per cent figure in April, the impact could still be enough to mean the economy shrinks again this quarter.

The extent of the damage is one reason European governments were reluctant to impose fresh lockdowns, though they ultimately had to take the measure as cases of the coronavirus surged.

Remote working will help France's service sector during the latest restrictions, but restaurants, bars and hotels will be hit to a similar degree as in the first lockdown.

The government has already downgraded its 2020 economic forecast to a contraction of 11per cent from 10per cent previously. It also plans to cut its growth forecast for 2021 at some point in the next two weeks as the situation evolves.

BLOOMBERG