The following developments are the main elements of the management report mentioned in article L. 451-1-2 of the French Monetary and Financial Code and in article 222-3 of the General Regulation of the AMF which must include the information mentioned in articles L. 225-100, L. 225-100-2, L. 225-100-3 and in the second paragraph of article L. 225-211 of the French Commercial Code.
Other information corresponding to elements required in the management report is to be found in Section 10.6 “Cross-reference table for the management report”.
The following discussion should be read in conjunction with the consolidated financial statements and related notes. They contain information concerning the Groupe’s future objectives which imply risks and uncertainties, including, in particular, those described in Chapter 2 “Risks and risk management”.
In 2020, the global economy suffered a completely unprecedented shock: the Covid-19 pandemic, which caused the voluntary shutdown of economies to combat the spread of the virus. It looks as though the economic effects of this pandemic will continue to be felt in 2021. Indeed, a second epidemic wave, which appeared in late autumn, has sometimes required strict lockdown measures, in particular in the United Kingdom and Germany. The announcement of the discovery of two vaccines has raised hopes to envisage an end to the health crisis, but that will take at least six months, because of the time required for mass vaccination and the achievement of herd immunity. The global GDP contraction in 2020 will be between -3% and -4% according to current forecasts (-3.2% according to the consensus, -4.4% according to the IMF). The economic outcome for 2020 differs widely by country. It depends on multiple factors: the virulence of the pandemic, the initial health and cultural characteristics, the type of lockdown decided, and the monetary and government support measures for households and businesses. Thus, China is the only major country to have seen an increase in its GDP in 2020 (+2% according to the consensus), while the United Kingdom paid the heaviest price (-11.1%). The US limited the decline in activity (-3.6%) due to less widespread and less stringent lockdowns than in Europe, and particularly strong monetary and government support measures. Germany managed to keep the decline in its GDP to -5.6%, but France (-9.3%) and Italy (-9.1%) are paying a heavy price. As in 2019, the protectionist policy of the USA and the uncertainties of Brexit also contributed to the weakness of activity. After a considerable initial fall, the oil price has gradually recovered to end the year down sharply. European sovereign interest rates remained very low throughout 2020: German and French rates were negative throughout the year.
In the United States, the decline in GDP was relatively small; although it varies greatly depending on whether the forecasts of the IMF (-4.3%), the Fed (-2.4%) or the consensus of Factset economists recorded on January 7, 2020 (-3.6%) are used. Such discrepancies reflect the specific nature of this economic crisis: unlike a “classic” recession, economic activity was stopped voluntarily by the public authorities, to prevent the very rapid spread of the epidemic. In the USA, lockdown measures were taken later and were often less stringent than in Europe, in particular because of the power of local authorities (states, counties and municipalities), but there has been an effective shutdown and then a restart of activity in the most important production centers, such as New York, which was particularly badly affected. The total number of non-agricultural employees in the private sector fell from 152 million in February 2020, to 130 million at the end of April, and then rose to 142 million as of December 31. The US economy held up relatively well thanks to the public support plan decided very quickly in March, and to the measures taken by the central bank, which intervened very early on the markets to prevent the health and economic crisis from being accompanied by a financial crisis. Public measures in the form of direct transfers, guarantees or tax deferrals are estimated at USD 2,900 billion, or 13% of GDP, which is considerable. In total, the counterpart of these support measures is a public deficit which is expected to represent a record 18% of GDP (estimates).
The European economy has been severely affected by the Covid-19 pandemic. The fall in GDP was almost twice the contraction in US GDP. In the euro zone, Italy (the first affected by the health crisis) and France suffered a drop in activity of around 9%. The largest slump in activity was in Spain (-11%). On the other hand, the German economy held up better, as the decline in GDP was limited to -5.6%. Lockdown decisions were made quickly, which caused sometimes impressive downturns in activity in the second quarter. The support measures were equal to the crisis, since, between guarantees, direct aid and payment extensions, the efforts of governments amounted to between 10.7% of GDP in Spain, up to 46% in Germany, which was the most proactive from this point of view. At the same time, the ECB announced exceptional measures, in particular the launch of a new unconventional monetary policy (asset purchases on the market), the PEPP, which was increased to euro 1,850 billion, or nearly 10% of the euro zone’s GDP. This very active monetary policy has allowed rates to return to very low levels following the increase observed in March, at the height of the crisis. The resumption of activity from the summer was impressive, but was thwarted by the second wave of the epidemic which occurred during the autumn. New lockdown measures were decided in November and December, particularly in Germany, which seemed to have more difficulties in controlling the epidemic during the winter than during the spring of 2020. The hypothesis of a new contraction of activity in Germany is now plausible. In this context, inflation remained under control, below 1% in the euro zone.
