France’s economy shrank in the fourth quarter as protests against President Emmanuel Macron’s pensions reform hit business activity.
The eurozone’s second-biggest economy contracted 0.1% during the fourth quarter, down from a 0.3% increase in the third quarter, the Insee statistics agency said in a first estimate for the period.
France’s economy minister Bruno Le Maire had said on Jan. 20 that the French strikes would cost the country 0.1 percentage points in growth of its gross domestic product. One week before, the governor of France’s central bank, Francois Villeroy de Galhau, had said the protests could cost the country up to 0.1 percentage points in economic growth in the fourth quarter.
“Given the duration of the strikes and the disruption they caused to transport and schools, they will undoubtedly have had some negative impact on economic activity in the fourth quarter,” Capital Economics’ Jessica Hinds said.
Evidence from previous strikes suggests that any economic impact is likely to be “limited and short-lived,” Ms. Hinds said.
Participation in the strikes that started on Dec. 5, has been declining significantly since Prime Minister Edouard Philippe’s removal of a controversial measure aimed at increasing the retirement age for full pension benefits.
“This decision is likely to decrease further social tensions around the reform and probably reduce–at least temporarily–disruptions in the public sector,” Goldman Sachs said.
However, any further escalation of tensions–with contagion to the private sector–could have “a meaningful negative impact on economic growth,” Goldman Sachs economist Alain Durre said.
Write to Maria Martinez at [email protected]
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