PARIS, Jul 30 (Reuters) – The downturn in the French economy may not be as severe as anticipated and activity in the euro zone’s second-largest economy may return to pre-crisis levels in early 2022, The governor of his central bank has said.
François Villeroy de Galhau told Paris Match magazine that the government of President Emmanuel Macron must spend wisely to rebuild confidence in the economy. Household and private sector confidence will be the key to a relatively quick recovery, according to the governor.
“Our forecasts predict a 10% drop in GDP this year: it may be a little better, with a strong rally afterwards to hopefully regain the pre-crisis level of activity in early 2022,” Villeroy said in the interview. published on Thursday.
The government resorted to a crisis package worth € 137 billion, or more than 6% of gross domestic product, to cushion the immediate impact of the epidemic, while also pledging to guarantee € 300 billion in bank loans for help keep companies afloat.
After the summer holidays, he will present a € 100 billion stimulus package to boost the recovery. Spending decisions will have to be smart, according to Villeroy.
“Public money is not unlimited,” he said. The ‘whatever is necessary’ must gradually give way to the ‘when it is necessary’ “.
French households would have savings of € 100 billion by the end of the year. But for that money to end up in the economy, it is essential that the government guarantees that taxes do not increase, and of course that they are not cut, according to Villeroy, since the state cannot afford it.
(Information from Richard Lough; edited by Alexandra Hudson; translated by Tomás Cobos)