GM Warburg Commercial - Lockdown Threatens France's Economic Recovery

GM Warburg Commercial analysts warn that national lockdown could harm France's already fragile economic recovery.

With Europe rapidly becoming the epicenter of the second wave of the coronavirus pandemic, Germany and France are resorting to national lockdowns to protect their countries from surging infection rates.

Of the two countries, France will have the harsher lockdown as it moves to prohibit almost all outdoor activity, close bars, cancel trade fairs, restrict restaurant operations and close its borders to non-European visitors from Friday the 30th of October. Germany has announced that it will close its restaurants and hotels and will ask residents to limit unnecessary travel from the beginning of this month.

For France, already battered by the impact of the first wave of the pandemic, the restrictions will place enormous pressure on its economic activity. Analysts at GM Warburg Commercial have warned that as many as 15 percent of businesses in France’s hospitality industry may be forced to close permanently by the end of this year.

Although France is trying to find a balance between acting decisively to control the recent increase in coronavirus infections and maintaining a healthy level of economic activity, analysts at GM Warburg Commercial say this will not be achieved easily. In the wake of the first wave of the pandemic, France’s economy contracted by 13.8 percent in the second quarter of this year. It had only just begun to make up that loss when cases began to surge once again.

Although public services and restaurant takeaways will be permitted to operate during the lockdown, French President, Emmanuel Macron, has promised to provide financial support to businesses forced to close during this month-long lockdown and insisted that “the economy must not come to a halt.”

Markets dropped significantly in response to the news that both Germany and France would go back into lockdown as investors feared the damage that would be done to the already fragile economic recovery in Europe.

Despite the relatively gloomy outlook for France’s economy as it goes into lockdown, Harry Woods, Director of Private Clients at GM Warburg Commercial remains optimistic.

“France’s economy was quick to bounce back in the third quarter and it is likely that we will see another good recovery once the lockdown is lifted, especially if economic activity is allowed to resume in December for the festive season,” said Woods.

Source: GM Warburg Commercial