Arno Fontaine, economist at Natixis and BSI Economics, answers three questions about the crisis linked to the COVID-19 pandemic.
BSI Economics – What will be the effects of the current shock on the French real estate market?
Arno Fontaine – The real estate market, like other sectors of the economy, will undoubtedly be impacted by the coronavirus crisis. Beyond the sharp drop in transactions that will be seen in the first two quarters of 2020 (lockdown measures, shutdown of the construction sector), households will tend to increase their precautionary savings, thereby reducing investment for 2020 and 2021.
Nevertheless, beyond these major economic effects, the current crisis will not be as shocking as the 2008 crisis was for the French real estate market. The decline in investment will not cause a lasting drop in prices over several years, and the real estate market could even be considered a safe haven for households, with a stronger rebound than before the crisis.
In which sectors should we expect the most job losses?
Certain sectors have been hit hard by the crisis (transport, tourism, entertainment). These will have to lay off a large number of employees until the end of the crisis before restarting fairly quickly once conditions are established. These sectors are less cyclical than industry and the primary sector, where productivity will decline sharply in the coming months due to physical distancing requirements. This will ultimately weigh on their turnover and lead to layoffs over a longer period.
Another factor is that the current crisis is likely to accelerate the automation of certain companies, which could ultimately destroy a number of jobs.
What economic policy should be implemented in the wake of the coronavirus crisis?
After the crisis, companies will be heavily indebted and will need to implement a number of budgetary savings plans. This will lead to a decline in investment, an increase in unemployment, and a negative snowball effect on the economy.
Governments must therefore support business production with aid mechanisms and tax cuts (e.g., production tax) and strengthen employment policies, particularly for young people.
In the longer term, consideration should be given to relocating strategic industries, implementing policies to green the economy, and better targeting investment towards sectors that are necessary for the long term (health, environment, training and education, etc.).
