France economy to shake off Paris shock — analysts

PARIS – France can withstand the financial shock of the Paris attacks, analysts say, despite people deserting big stores, shunning concert halls and cancelling hotel bookings.

Beyond the incalculable human cost, the experience of attacks in New York in 2001, Madrid in 2004, London in 2005 and Mumbai in 2008 shows the economic impact may be fleeting.

The November 13 jihadist shooting and bombings in the French capital, which killed 130 people and wounded hundreds more, led to an immediate 80 per cent plunge in concert ticket sales, an association of promoters said.

Shoppers also fled Paris’ iconic department stores Printemps and Galeries Lafayette, which reported customer numbers tumbling by between 30 and 50 per cent. 

Hotels, too, reported a slump in bookings.

Such reactions are likely to be transitory, however, analysts said.

After the March 11, 2004 Madrid train bombings, which killed 191 people and wounded nearly 2,000, the capital’s Complutense University estimated the cost to the city’s economy at 0.16 per cent of annual economic output and the cost to the country at 0.03 per cent of output.

In Britain, consumer confidence took a hit when four coordinated suicide attacks on three London underground trains and a bus killed 56 people. But a budding economic recovery continued, said analysts at BNP Paribas.

“In the similar attacks in Madrid and London, the impact on country-wide statistics and overall consumer confidence was relatively small,” said a report by Goldman Sachs.

‘Massive human cost’       

The Paris attacks differed, however, because they came only 10 months after gunmen attacked satirical weekly Charlie Hebdo, killing some of France’s most beloved cartoonists in a rampage that left 17 dead there and elsewhere in the city.

“While the terrorist attacks on Paris came at a massive human cost to the city and to France more widely, the sanguine reaction of the financial markets to the atrocities and past experience of similarly tragic events suggest the economic impact is likely to be limited,” BNP Paribas analysts Dominic Bryant and Gizem Kara said in a report.

“As this is the second attack on Paris in less than 12 months, however, there is some risk of a greater reaction than elsewhere, particularly as the French economic recovery has been relatively tepid,” they said.

In Mumbai, India, where gunmen stormed luxury hotels, the main railway station and other sites in November 2008, killing 166 people, businesses reported a plunge in profits and a wave of cancellations by tourists.

“The business climate was affected for several months,” said Ashutosh Data, economist at IIFL Institutional Equities.

“But the situation returned to normal after three to six months because, as terrible as the attacks may be, there was not a feeling that the country was becoming unstable,” he said. 

‘A major risk’       

Investors, too, are unlikely to shun France, said Muriel Penicaud, managing director of Business France, which promotes French business

“An investment is always a long-term decision linked to corporate strategy,” Penicaud said.

“The risk of an attack is a big concern in Europe and beyond Europe,” she added. “The need to invest in countries with talent, infrastructure, markets, remains very important to companies’ strategies.”

Consumption is recovering after the Paris attacks but the impact on tourism may last longer, said Philippe Gudin, analyst at Barclays.

“Attacks against civilians in a European country are likely to weigh on consumer confidence, a major risk in a situation where the main driver of growth in Europe is consumer demand, with other components of demand still very subdued,” Gudin said in a report.

“Tourism could be hurt more durably,” he said, with a likely impact on economic activity in the final quarter of 2015. “Longer term impacts are more uncertain,” he added.

It is still too early to draw conclusions about the longer term impact, the analyst cautioned, citing an apparently growing international threat of attacks by Daesh jihadists.

Gudin noted in particular the twin bombings in Beirut this month that killed 44 people and the bomb attack on a Russian passenger jet over Sinai last month that claimed the lives of all 224 people aboard, both claimed by the Daesh jihadist network.

“In addition to the Paris attacks, other recent terrorist attacks including the attacks in Beirut and its suspected downing of a Russian passenger airliner in Egypt show that the threat from Daesh is intensifying and spreading and that geopolitical risk is a growing downside risk to global growth,” Gudin said.

“Therefore, any comparison with previous terrorist attacks such as in Madrid in 2004 and London in 2005 is not necessarily relevant.”