BPCE - 2020 Universal Registration Document

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ACTIVITIES AND FINANCIAL INFORMATIONS 2020

OUTLOOK FOR GROUPE BPCE

Outlook for Groupe BPCE 4.7

4.7.1

2021 Outlook: a still partial and uncertain mechanical rebound

In 2021, the path of economic recovery in developed countries remains very uncertain and vulnerable, particularly to a recurring upsurge in Covid-19 with a risk of the virus mutating and, consequently, new lockdowns, especially in Europe, even if vaccination programs promise herd immunity to the disease. However, the more or less rapid implementation of these programs, depending on the country, would accentuate the strong geographical heterogeneity of the economic impact of the pandemic, as France, for example, would not be able to achieve this immunity before the beginning of 2022. It is therefore unlikely that the pre-crisis level of activity in Western economies will be restored before 2022, especially since more lockdowns in Europe and France, even if they are more flexible or shorter than before, will affect increasingly weakened economies. In addition, health and economic uncertainty, by continuing at least into the first half of the year, or even by materializing potentially deflationary“stop and go” mechanisms, would naturally lead to more restrictive spending behavior. For households, this translates into a desire to save more as a precaution, to protect themselves against a possible loss of jobs, and, for companies, in a decrease in investment and a reduction in costs, often in the form of a reduction in headcount. In the proposed trend scenario, global GDP would grow by 4.9% after -3.8% in 2020, exceeding its level of 2019 mainly thanks to the Asian rebound in general and China in particular. China is expected to return to a growth rate close to that of 2019, despite fears about corporate debt and the rise of the yuan. The United States, which remains constrained by a persistent epidemic, would benefit from the depreciation of the dollar and especially from the new fiscal stimulus, or even the adoption of an even more ambitious recovery plan, thanks to political support from the Biden administration. The combination of unlimited monetary policy easing by central banks and the prospect of huge fiscal stimulus, in a lasting environment of extremely low interest rates (still close to zero), would support the mechanical recovery expected on both sides of the Atlantic, especially starting in the second half of the year, once the measures to contain a new epidemic have passed. The outflow of liquidity, accentuated by the ECB with the amplification of its Pandemic Emergency Purchase Program, and the absence of a hike in key rates would only allow an insignificant rise in long-term rates, despite the economic improvement and the slight increase in inflation, which are mainly oil-related. Oil prices would, in fact, be driven to around $55 per barrel by the renewal of the OPEC+ agreement to cut oil production. The risk of deflation, which is more likely in Europe than in the United States, still appears to be higher than the risk of any resurgence of real inflation this year, apart from the probable emergence of financial and real estate bubbles. Real long-term interest rates should remain negative, eliminating any risk of a “snowball” effect on public debt.

French growth is unlikely to return to its pre-crisis level in 2021, with its mechanical and partial rebound being closer to 5% than to 7%, despite the stimulus from the recovery plan, amounting to one point of GDP. This incomplete catch-up would be far from wiping out the previous loss of wealth of about -8.2%, leading to major risks of a lack of social understanding. In particular, we are likely to see a surge in the unemploymentrate (10.6%), which is often a delayed consequenceof the economic situation. This surge would then be clearly out of step with the apparent recovery in economic activity. This perception would fuel a prolonged behavior of precautionarysavings, if not a social ferment to be stopped. The household savings rate already exceeded 20% of their income last year, this sharp increase being mainly due to involuntary (forced) savings, linked to the difficulty of consuming during the two lockdowns. A substantial mechanical decline is expected in 2021, but not enough to boost activity more clearly, remaining at a high level of close to 17% (compared to 14.9% in 2019). This wait-and-see attitude would also be motivated by prudence and health uncertainty, and even by a decline in more essential spending, despite the relative strength of purchasing power. Despite the deterioration in the labor market, the latter would still benefit from the various aid mechanisms put in place by the State and a moderate rise in inflation to around 1%, in line with the economic improvement and the rise in oil prices. Productive investment by companies fell less than GDP in 2020, thanks to the preservation of liquidity reserves through credit. Supported by the stimulus plan, it should rebound cautiously, due to the weakeningof the cash position, the need for massive capital reinforcement, and a traditional effort to tighten costs and even reduce debt after such a shock. Finally, despite the restrictions on mobility weighing on tourism and the aeronautics industry, the contribution from the outside world is expected to gradually improve, due to the upturn in global trade and the European economy. In addition, emergency measures on an unprecedented scale, followed by the ramp-up of the recovery plan, combined with the weakness of economic recovery, will continue to significantly deteriorate the State’s deficit and debt. OUTLOOK FOR THE GROUP AND ITS BUSINESS LINES After a year impacted by the global health emergency caused by Covid-19, and its consequenceson almost all sectors of the real economy, 2021 could bring an exit from the crisis carried by the hope of a medical solution. However, alongside a recovery in supply and demand, 2021 should also be a year of transition, adaptation and even survival for many economic players, requiring solutions to meet the new needs that have emerged during the crisis. In a context of uncertainties, but also of opportunities, Groupe BPCE has begun preparing its future strategic plan, which will be communicated in 2021.

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UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE

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