French economy set for firmer 2021 amid virus

Bloomberg

The French economy is weathering the Covid pandemic and government restrictions better than previously forecast, putting it on a path to stronger growth this year, the Bank of France said.
Activity falls less than the central bank initially expected at the end of 2020 as household and business investment held up despite the lockdown in November. The central bank expects stronger growth in the second half of this year as health restrictions are lifted and vaccines slow pandemic.
“We are gradually moving away from massive public support measures seen in 2020 — which were necessary and effective — to private sector confidence,” Bank of France Governor Francois Villeroy de Galhau said. “We expect a return to pre-Covid levels of activity in the spring of 2022, which is a bit better than what we forecast in December last year.”
The report supports other evidence that the euro area’s second-largest economy has adapted to Covid restrictions and will avoid a steep second dip. For now, the government hasn’t imposed a full lockdown to contain resurgence of virus, opting instead for a curfew combined with tough restrictions on leisure and hospitality.
Villeroy said central bank’s forecasts are even “fairly cautious” as they are based on health restrictions being on average unchanged throughout first half of 2021. The government said the country may start returning to normal from mid-April.
The central bank also issued stronger forecasts for the labor market thanks to the “powerful shock-absorber” of state-financed furlough programs that translate into cuts in working hours rather than jobs.
The withdrawal of aid and an increase in business failures may mark a low point for employment later this year, the central bank said, but unemployment, which will peak close to 9.5% at the end of 2021, will average 8.9% over the whole year instead of a previously forecast 10.7%.
Despite the stronger outlook, the Bank of France also said uncertainty surrounding its forecasts is still “significant” due to the health situation.