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Financial News: French Economy Contracts Most Since 1949 Amid Lockdown

French Economy Contracts Most Since 1949 Amid Lockdown

04/30/2020 - 01:54:00 (RTTNews)

(RTTNews) - The French economy contracted at the fastest pace on record in the first quarter due to the containment measures taken to curb the spread of coronavirus, preliminary data from the statistical office Insee showed Thursday.

Gross domestic product fell 5.8 percent sequentially in the first quarter, the biggest decline since the series began in 1949. Economists had forecast a 3.5 percent fall after contracting marginally by 0.1 percent in the fourth quarter of 2019.

Two consecutive declines in GDP indicate that the economy has entered a technical recession.

Earlier, the Bank of France had estimated a 6 percent fall in the first quarter GDP.

GDP's negative evolution was primarily linked to the shut-down of "non-essential" activities in the context of the implementation of the lockdown since mid-March to contain the spread of coronavirus, the Insee said.

The expenditure-side breakdown showed that household consumption dropped 6.1 percent. Gross fixed capital formation declined 11.8 percent. Overall, final domestic demand excluding inventory changes fell sharply, contributing -6.6 points to GDP growth.

At the same time, exports fell 6.5 percent and imports were down 5.9 percent. All in all, the foreign trade balance contributed negatively to GDP growth by -0.2 points.

Conversely, changes in inventories contributed positively to GDP growth by +0.9 points.

According to International Monetary Fund, France will shrink 7.2 percent this year before expanding 4.5 percent in 2021.

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