France sees economy shrinking 8 percent due to COVID-19 effects

The French government has scrapped its days-old economic outlook after President Emmanuel Macron extended a national lockdown, shutting down swaths of the euro zone’s second-biggest economy.

Finance Minister Bruno Le Maire said on Monday the economy is now expected to contract 8 percent this year instead of the 6 percent flagged as recently as Thursday, revising the number to take the longer lockdown into account.

Since March 17, France’s 67 million people have been ordered to stay at home, leaving only to buy food, go to work, seek medical care or exercise on their own. The lockdown was originally scheduled to end on Tuesday.

The extension would put additional strain on public finances, blowing the public sector budget deficit out to a post-World War II record of 9 percent of gross domestic product (GDP), up from 7.6 percent last week, Budget Minister Gerald Darmanin told France Info.

The government more than doubled last week a package of measures to pull the economy back from the precipice, raising it to at least 100 billion euros ($109.32bn) – more than 4 percent of economic output.

“If we need to do more, then we will do more. We will be there,” Le Maire told BFM TV.

The package allows companies to defer billions of euros of tax and payroll charges to cope with the collapse in business and creates a 7 billion-euro ($7.65bn) fund for the most fragile small companies, which has already been tapped by 900,000 firms.

With eight million workers on state-subsidised furloughs, the government has increased to budget for that programme to 24 billion euros ($26.2bn) from 20 billion euros ($21.9bn) before the extension, Le Maire said.