Coronavirus: French economy expected to shrink by 11% in 2020

·Germany Correspondent, Yahoo Finance UK
·2-min read
French President Emmanuel Macron (R) and French Economy and Finance Minister Bruno Le Maire (L) visit a factory of manufacturer Valeo in Etaples, near Le Touquet, northern France on May 26, 2020 as part of the launch of a plan to rescue the French car industry. (Photo by Ludovic MARIN / AFP) (Photo by LUDOVIC MARIN/AFP via Getty Images)
French president Emmanuel Macron (R) and French economy and finance minister Bruno Le Maire (L) visit a factory of manufacturer Valeo in France, 26 May 2020, as part of the launch of a plan to rescue the French car industry. (Ludovic Marin/AFP)

Gross domestic product (GDP) in the European Union’s second largest economy will shrink by 11% this year due to the coronavirus pandemic, according to France’s finance and economy minister Bruno Le Maire.

This is a greater contraction than the previously expected minus 8%. For comparison, the German economy is expected to shrink by around 6.6% in 2020.

The country was hard hit by the pandemic and, while the government took measures to protect the health of the French people, “the economy practically stalled for three months, and we will pay for it with growth," Le Maire told RTL radio station.

France has so far reported 189,348 cases of coronavirus and 28,836 COVID-19 deaths, according to the latest data from Johns Hopkins University. Its death toll is among the highest in Europe.

READ MORE: Air France gets green light for €7bn bailout

French GDP shrunk 5.3% in the first quarter, and the contraction is expected to be much more drastic for the second quarter, when extreme lockdowns were in full force.

France has so far spent €450bn (£400bn, $500bn) on a measures to help the economy withstand the impact of the coronavirus pandemic.

Le Maire told RTL that he had “absolute conviction” that “the strategy we have adopted to support the sectors, support employees and modernise our productive tissue, will allow us to rebound in 2021."

Last week, French president Emmanuel Macron announced €8bn in financial aid to support its automotive industry.

Boosting production and sales of electric and hybrid cars is central to Macron’s stimulus plan, which includes significant buyer incentives to go green. Its goal is to produce over one million clean-energy vehicles in the country by 2025.

READ MORE: France earmarks €8bn stimulus package to support car industry

The government also wants its car giants, such as Renault (RNO.PA) and the Peugeot Group (UG.PA) to focus production in France.

Renault is currently in discussions for a state-backed loan of €5bn. The government has also approved a €7bn bailout for flag carrier Air France.