ECB’s Villeroy: Expect French 2021 Economic Growth of at Least 5%

9 March 2021

By David Barwick – FRANKFURT (Econostream) – The French economy has left recession and will expand by at least 5% this year, European Central Bank Governing Council member François Villeroy de Galhau said Tuesday.

In an interview on French radio network France info, Villeroy, who heads the Bank of France, said that ‘[t]he recession is behind us’ and the French economy is entering ‘a second phase that we think will last about a year.’

The Bank of France will publish new growth forecasts next week, he noted, but in them, ‘growth will be at least equal to 5% in 2021, and it will be one of the strongest in Europe, clearly superior to the European average.’

Asked to offer grounds for confidence about the recovery, Villeroy cited fiscal and monetary support, which he said were ‘absolutely’ working as intended. However, he added, ‘[t]hat will have to be progressively diminished as the health restrictions are lifted.’

The faster-than-expected recovery of consumption last year is ‘very encouraging’, he said. ‘So we think that consumption will accelerate towards the … end of 2021 and the beginning of 2022. We will have regained the pre-Covid level of activity in the spring of 2022 or in the summer.’

Villeroy rejected again the idea of cancelling the national debt held by the Eurosystem.

Villeroy’s comments do not clearly support expectations of a very significant upward revision to existing forecasts for French growth, but are nonetheless reflective of somewhat greater, albeit cautious optimism. In issuing its December macroeconomic projections, the Bank of France had said that ‘the level of activity of end-2019 would only be regained in mid-2022, and this catching back up would be spread over 2021 and 2022, with GDP growth of around 5% in each of these two years.’

The expectation expressed by Villeroy of a return to pre-Covid output levels in France in the spring or summer of mid-2022 is consistent with the December view of this as occurring in mid-2022. His prediction of at least 5% French growth this year could be somewhat better than the December forecast of ‘around 5%’.