Even optimistic scenarios see a significant income loss after the COVID crisis: Who will bear it?

We look at the case of France, starting with the Bank of France’s relatively optimistic growth scenario. Even this scenario leads to a level of GDP in 2022 that, although 1% higher than its 2019 level, will still be 3.5% lower than it would have been without the COVID crisis . And this income loss will get bigger if potential growth is reduced by the crisis. Who will bear this permanent income loss of around 4%? It is unlikely to be the government: this would require a fiscal deficit that would never fall below 6%; It is unlikely to be companies: they are able to restore their earnings after the crisis; It will therefore primarily be households, via a mix of job losses and lower real wages or higher tax es relative to a trajectory without the COVID crisis.