Thu. May 19th, 2022


France moved away from its European neighbors with a growth of 7 percent in 2021, the country’s fastest expansion for 52 years, as it returned above pre-pandemic production levels thanks to higher consumer spending.

The force of France’s revival of the coronavirus pandemic, which plunged the country into a record post-war recession in 2020, is good news for president emmanuel macronwhich is expected to seek a second term in April’s elections.

The French economic recovery continued in the last three months of last year, with growth in gross domestic product of 0.7 percent from the previous quarter. It exceeded most economists’ expectations and surpassed its larger neighbor Germany, where the economy shrank by 0.7 percent in the same period. Full-year growth was 2.8 percent.

“The French economy has recovered spectacularly and this has wiped out the economic crisis,” Finance Minister Bruno Le Maire told France 2 Television. “There are still certain sectors that are experiencing problems, such as tourism and hotels, but most are recovering very strongly and this is creating jobs.”

Combined with stronger-than-expected growth in Spain, France’s resilient performance suggested that the eurozone is likely to grow at a healthier-than-expected rate in the fourth quarter.

Martin Wolberg, senior economist at Generali Investments, said “we are going through a softer period, but it looks like we will avoid a recession in the euro area”. He predicted that the block would grow by 0.3 to 0.4 percent in the fourth quarter, when those figures are released on Monday.

Spain’s economy also performed better than expected in the fourth quarter, growing by 2 per cent and strengthened by a strong recovery in services exports stemming mainly from tourism. However, the Spanish economy remained 4 percent below pre-pandemic levels of gross domestic product, despite growing 5 percent last year – the fastest growth rate since 2000.

Spanish 2021 growth was below the government’s forecast of 6.5 percent. Pablo Casado, leader of the opposition People’s Party, said the figures “confirmed the worst recovery in Europe” and tweeted that the government “should stop lying to the Spaniards and review the forecasts now”.

Germany’s contraction in the fourth quarter left its output 1.5 per cent below pre-pandemic levels and underlined how Europe’s largest economy hit through its greater exposure to supply chain bottlenecks and a weaker recovery in household spending. In contrast, the US economy wash 3.1 percent above its pre-pandemic level in the fourth quarter.

“The German economy went into hibernation at the turn of the year,” said Carsten Brzeski, head of macro research at ING. “Restrictions on tackling the fourth wave of the pandemic and the Omicron wave, as well as higher energy prices, have plunged private consumption.”

Line chart of GDP index rebased, Q4 2019 = 100 showing that France's economy has risen above its pre-pandemic levels

France, on the other hand, was boosted by a sharp rise in consumer spending after easing coronavirus restrictions last year, while also benefiting from its lower exposure to the global bottlenecks provided which hit German manufacturers.

The French National Statistics Office said average growth in 2021 was the fastest rate since 1969, at the height of the post-war period known as “les trente glorieuses”. The economy has returned sharply from its 8 percent contraction in 2020.

The eurozone’s second-largest economy returned to its pre-pandemic level of GDP in the third quarter, it said. Germany is unlikely to reach that milestone until the second quarter and Spain is expected to do so even later.

In the fourth quarter, France’s economy was driven by a 0.4 per cent increase in household spending and a 0.5 per cent increase in investment, while changes in inventories also contributed 0.4 percentage points to growth. Trade, however, made a negative contribution of 0.2 percent.

However, economists expect a slowdown in the French economy at the beginning of this year after daily coronavirus cases reached a new high of 500,000 this week and stricter rules requires people to be fully vaccinated to enter many public places.

The number of Covid-19 patients in French hospitals has risen above 30,000 for the first time since November 2020, but a lower percentage of them are in intensive care than in previous waves of the pandemic.

The French government, which plans to ease coronavirus restrictions next month despite the high level of cases, previously predicted that the economy would grow by 4 percent by 2022.

Additional post by Daniel Dombey in Madrid



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