RaboResearch - Economic Research

France: Lockdowns determine economic recovery

Economic Update

  • Unlike other European countries, France has not reinstated a strict lockdown
  • Consequently, we expect the French economy to grow by 0.3% in 20Q1 and 5.8% in 2021
  • Macron has to balance the health and economic crisis. Meanwhile, the political pressure is mounting
  • Moreover, French vaccine scepticism poses a risk to a swift re-opening of the economy

A delicate balance

Since the second wave of infections has hit Europe, most countries have reinstated containment measures. When France reinstated a second national lockdown, retail sales contracted by 28% m/m in November and many economists (including ourselves) feared the worst (figure 1). When some of the measures were loosened on November 28 however, the economy rebounded sharply in December. This once again underlines the strong correlation between lockdowns and economic activity. Altogether, the contraction was 1.3% q/q in the fourth quarter and 8.3% for the year.

Because of this strong correlation, we have penciled in a small expansion of the French economy for the first quarter, whereas we expect other Eurozone economies to contract, since the French economy has been relatively open for the first quarter (especially compared to the fourth quarter). Moreover, the situation is France actually seems quite stable despite the fact that some of the measures were lifted[1], which was underlined by health minister Olivier Véran. The next few weeks will tell whether the situation will remain stable, but for now relatively loose measures give the economy some room to breathe.

Moreover, it is in Macron his interest to find a balance between controlling the virus and controlling the economy. Where other leaders, in Germany and the Netherlands for example, have seen their approval ratings and/or the polls skyrocket (the so called ‘rally to the flag’-effect), this has failed to materialize for Macron. Moreover, he is currently trailing behind Marine Le Pen in the polls for the 2022 national elections. Macrons political fate will be closely tied to how well he handles the pandemic and the public’s perception of this. And now that the public support for lockdowns is dwindling (e.g. see the riots in the Netherlands), Macron will probably only ramp up the measures if there is absolutely no other way.

Figure 1: Retail sales have taken a hit when stores closed in November, but rebounded in December when restrictions were lifted
Figure 1: Retail sales have taken a hit when stores closed in November, but rebounded in December when restrictions were liftedSource: Macrobond, INSEE, DGECFIN
Figure 2: Despite easing restrictions, there has only be a modest uptick in cases in France
Figure 2: Despite easing restrictions, there has only be a modest uptick in cases in FranceSource: Macrobond, WHO

The vaccine race

France started its vaccine campaign on December 27 and has administered around 4 million jabs since then. But internationally speaking, France isn’t doing too well. Around 4% of the French population has received a first jab, compared to 13% in the US, 26% in the UK or even 50% in Israel (figure 3). These figures are not out of line in Europe however. Vaccine administration has trailed behind in every country, mostly because of a delay in the distribution of vaccines to the member states and delayed approval of the vaccines available.

Even though there has been some harsh criticism on the organization surrounding the vaccination, things could take a turn for the better when the vaccines are widely available. At the current pace, the entire adult population would be inoculated in august 2023. But thankfully, the pace of vaccination is likely to pick up since France has shown that it is capable of inoculating the population at a much higher rate. For example, around 1.5 million French citizens were inoculated every day during the flu season this year.

However, it is not just a matter of having a sufficient number of vaccines in store and distributing them efficiently. A recent poll suggests that just 57%[2] of the country intends to get vaccinated, compared to 89% of UK citizens. This is not new, since French citizens are notoriously wary of vaccines in general (figure 4). In France, 33% of respondents disagreed with the statement that vaccines are safe, compared to 13% in Germany and 8% in China. Consequently, some worry that the vaccine uptake in France will be even slower than in other countries.

If this were to be the case, economic recovery would also be hampered, since it would take longer before the virus is brought under control and the economy can fully open up again. We consider this to be a risk scenario, simply because of the fact that despite historical vaccine-scepticism, vaccination rates are actually quite high amongst the French. It seems that, paradoxically, the French grumble at the thought of a vaccine, but show up for their jab anyway. For now, we have pencilled in an economic expansion of 5.8 percent for 2021 and a further expansion of 2.9 percent for 2022. This implies that the French economy will be fully recovered to pre-COVID levels (2019Q4) in 2022Q3, which is somewhat sooner than the Eurozone average.

Figure 3: France trails behind in the vaccine race, just like the rest of Europe
Figure 3: France trails behind in the vaccine race, just like the rest of EuropeSource: Macrobond, Our World In Data
Figure 4: Opinion on the statement: “Vaccines are safe”
Figure 4: Opinion on the statement: “Vaccines are safe”Source: Gallup (2020)


[1] There are still some areas, in metropolitan Paris for example, where the rules are still very stringent. Some regions are set to have stricter measures over the coming weeks.

[2] These figures are still remarkably better than an Ipsos study in December, which suggested that only 40% of French adults would get vaccinated for COVID-19 if it were available.

Erik-Jan van Harn
RaboResearch Global Economics & Markets Rabobank KEO
+31 6 3002 0936

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